Tenders, Contracts and Arbitration

For Indian Railways; Government & Civil Organizations and Contractors

By: Pramod P. Goel

Tenders, Contracts and Arbitration

By
Pramod P. Goel

BSc, MBA, Member IETE Former Deputy Chief Signal & Telecom. Engineer, Central Organisation For Railway Electrification. (E-mail: ppgoel@hotmail.com)

2011

Published by: M/s Astha Publication F-8, Panch Pushp Apartments, Ashok Nagar, Allahabad-211001 Phone:919935667116

Distributers: M/s Universal Book Corner 20, Mahatma Gandhi Marg, Civil Lines, Allahabad-211001 Phones:919335154452

 Pramod P. Goel

Other books by the same author: Already published: 1. Indian Railway Signal Engineering, Volume-1, History, systems of working, signals in general. 2. Indian Railway Signal Engineering, Volume-1V, Multi Aspect Colour light Signal Engineering including Solid State Interlocking. Under publication: 1. Indian Railway Signal Engineering, Volume-1I, Designing of Signal Engineering Plans and drawings. 2. Indian Railway Signal Engineering, Volume-III, two and three aspect Mechanical Signal Engineering. 3. Electronic Interlocking By: S.C. Mishra & Pramod P. Goel

Published: September, 2011 Price : ` 220.00 : U.S. $ 20.00

PREFACE
Having been associated with and having gathered experience in contractual system of getting the work executed, formulating the rules, conditions of contracts, tender documents and all associated techno legal matters along with post contractual issues for more than for twenty one years and also being lone arbitrator & as member of many Arbitral panels and having successfully contested multi-crore valued claims arbitrations representing railways, while working in Indian Railways, I decided to share my experiences with people concerned and people at large. The book running in 229 pages covered under seven chapters and ten annexure. First digit of the number of the paragraph denotes the number of the chapter while second, third and fourth digits depict main, sub and sub to sub paragraph numbers; further sub groups have been numbered in Romans & alphabets; Chapter Three is in two main sections, Section-I & section-II, while Section-I is further grouped in subsections A, B, C & D. The numbering within each subsection starts from zero such as first number of each such subsection of Chapter-III shall be 3.0, continued as 3.1, 3.2 and so on. First five chapters cover defining Tenders, Contracts & Acts and structure of firms; companies and joint ventures; type of services and system of contracting; Process of Tendering & Entering in to Contract. Section-I of the Chapter-III covers works contracts, procedures for preparing tender document, receipt & evaluation of tenders, evaluation of bids, tender committee recommendations, acceptance of tender committee recommendations and award of contract read with provisions of associated Acts and rules and Section-II, the Project Management Consultancy Contracts for railways, evaluation under QCBS & CQCCBS methods which is a new concept drawn from Ministry of Finance, Government of India. Remaining chapters cover post contractual matters, from financial advances, variation in cost of work to vitiation of the contract with the variation, measurements and release of payments; General Conditions of Contract framed and issued by the Railway Board to be universally implemented on All Indian Railways and framing of Special Conditions of Contract by the zonal railways to match the requirements of the site and speciality of the work under the contract, Chapter VI deals with matters on Arbitration associated Arbitration and Conciliation Act, 1996, from demand of arbitration, appointment of Arbitral Tribunal & Excepted Matters, arbitration proceedings, award and appeal for setting aside the award. Railway Boards directives to deal with arbitration matters have also been covered here. Chapter VII deals with matters related to Vigilance, causes and remedies and some important tips to deal with the situation when involved.

As an added advantage to the reader, relevant Acts and rules are annexed as ready reference. Ten annexure placed amongst last pages of the book, provide relevant sections of The Constitution of India; Railway Act 1989; Indian Contract Act (IX) 1872; Contract Labour (Regulation & Abolition) Act 1970, Indian Railway Act, 1989; Contract Labour (Regulation & Abolition) Act 1970, Arbitration And Conciliation Act, 1996. Besides, Joint Venture agreement clauses & relevant Clauses of GCC as issued by Ministry of Indian Railway, Railway Board; Vigilance Directorate, Vigilance Manual- 2006, Chapter -II, Central Vigilance Commission (CVC) and format of measurement book with guide lines for filling the same including record of Measurements, from Engineering Code, issued by Ministry of Railways have also been provided. Valuable Circulars issued by Ministry of Railways, Railway Board have been referred to as guidelines used and followed by Indian Railway. While using the information, reference to the relevant circular number has been given with the date, to ensure that the information so furnished is updated up until the date of circular. Indian Railways has its own merit with rich experience in dealing with contracts equipped with highly learned and experienced officials from Ministry of Railways, the apex body and down below the line, as such is most successful in organising contracts with minimum possible abrasions, peaceful execution and settlement of the contracts. Accordingly it shall be of great interest to the organisations other than railways to emulate part of the healthy and useful practices followed by the railways, in dealing with contractual system of working. I do not know to what extent the effort has been successful as such any suggestions for its improvement shall be my privilege.

ACKNOWLEDGEMENTS
This book is the result of persistent encouragement of Shri Madan Mohan Agarwal, Ex Chief Engineer Northern Railway and author of many books on railway engineering to his credit. I am deeply indebted to him and extend my sincere thanks to him. Debts of gratitude are owed to Shri Anup Kumar, Chief Electrical Engineer (P&D), Central Organisation for Railway Electrification, Allahabad, not only for providing me with support through many important documents which otherwise would not have been available to me as well as reading the proof against time available, word by word and giving valuable suggestions of major significance I am thankful to Shri Asit Hajela Chartered Accountant and conferred with IFRS (International Financial Reporting standard) certified by the Institute of Chartered Accountants, who helped me in defining Company, Firm & related rules.

I am also thankful to Shri P.L. Srivastava Ex SSTE, CORE who, having gone through entire text of the book painstakingly has not only screened out many typographical mistakes but also has been instrumental in modification of text; to Shri Kashi Ram Verma, SSTE Central Organisation for Railway Electrification for supporting me with material on the subject as related to the contracts for Signal & Telecommunication works; to Shri Amit Kesarwani, working as Design Engineer with M/s The Goel Associates, who has taken keen interest having gone through the contents of the book and editing it so as to bring the document to the stage of publication. Lastly, but not the least, I thank my family members, my wife Pratibha Goel without whose unqualified support it would not have been possible to devote time in writing the book; and to my children Vaibhava, Chhavi and Vipul and their spouses, my son in law Amitabh Singhal, and daughters in law Sumedha Goel and Nimita Goel, who have always been extending moral support, to enable me to reach this point. Pramod P. Goel (Ex) Deputy Chief Signal & Telecommunication Engineer Indian Railways.

337-C/ 1, Newada, Ashok Nagar, Allahabad -211001. Ph: 919415237899; ppgoel@hotmail.com.

Place: Allahabad. Date: 11.09.2011

CONTENTS

Page Number
CHAPTER-I; TENDERS, CONTRACTS & ACTS: 1.0 Contractual system and Acts: 1.1 Contracts for Execution of work and associated Acts Provisions of Constitution of India, Provisions of Railway Act 1989, Provisions of Contract Labour (Regulation & Abolition) Act 1970: 1.2 Contract for Procurement of material for issue to the contractor: 1.3 Tenders defined: 1.4 Contract & Act: 1.5 Agreement & Corresponding Act: 1.6 Indian Contract act (Act IX of 1872), History & references, Clause 2 -Interpretation clause, Proposal, Acceptance & Promise, promisor and Promisee, Consideration, Agreement, Reciprocal promises, Void agreement, Contract, Voidable contract: 1.7 Type of Tenderers: Firms, Proprietorship Firm, Partnership Firm, Limited Liability Partnership (LLP) Firm: 1.8 Company, Private Limited Company, Public Limited Company: 1.9 Change of Firm/ Company name by the tenderer and retention of credentials: 1.10 Firm or Company as Subcontractor: 1.11 Joint Venture (JV) Firm, consortium, Participation of Joint venture firms in works tenders: 1-9 1

1-2 2 2 2-3 3

3-4

4-5 5-6 6 6-7 7-9

CHAPTER-II; TENDERS & TYPE OF SERVICES: 10-30 2.0 Tenders: 10 2.1 Type of tenders based on purpose, Execution of works of General nature, Nature specific to Railway requirement, Labour oriented only, Consultancy contracts, procurement of major material, Procurement of labour: 10 2.2 Execution of work, Execution of work where major material specific to technical requirements of the work is supplied by railways, Execution, where the contractor has to complete the work ready to be used i.e. Turn Key contract, Special purpose works: 10-11 2.3 Labour oriented works; labour contracts, governed by The Contract Labour (Regulation and Abolition) Act, 1970, Act No. 37 Of 1970, Section 10, Prohibition of employment of contract labour, Contract Labour defined, GCC 55, Sham contract & conditions: 12-15 2.4 Consultancy Contracts, Project, Project management i Pramod P. Goel

Tenders, contracts and arbitration & Project Management Consultancy, Project, Consultancy: Project Management Consultancy (PMC) contract by Railways, grouping management consultancy services as Consultancy prior to award of contract, consultancy post award of contract, Consultancy for complete Management of Project, Role of PMC, when work is awarded to an agency for execution, quality, time cost and documentation management, Advantages of engaging consultant: Type of tenders Based on system of contracting, lowest and valid bidder, Single packet system of tendering, Two packet system of tendering, Limited tender, List of Approved contractors-preparation of, Financial groups of categories D1,C1,B1 &A1, Committee for Examining the Applications, Registration Charges, Eligibility criteria category-wise, Standing Earnest money, Powers for calling of limited tenders, procedure for formation of approved list of contractors, Maintenance of the approved list of contractors, Special limited tender, Single tender, Emergent situations, Short notice tender: Procurement of material for works contracts: Procurement of proprietary items by railways: Dispensation of tender; powers, Quotation: 15-16

2.5

16-20

2.6

2.7 2.8 2.9

20-28 29 29 29-30

CHAPTER-III; PROCESS OF TENDERING & ENTERING INTO CONTRACT: 31-99 SECTION I; WORKS CONTRACTS: 31-90 3.0 Tendering process: 31 A) 3.1 3.2 3.3 3.4 3.5 FIRST IN-HOUSE PROCESS: First in-house process before issue of tender notice: Bill of Quantities (BOQ): Schedule of rates, Rate analysis and preparation of Schedule of Rates (SOR): Non SOR (NS) items: Preparation of tender documents, working out prevalent cost of work, Last accepted rates (LAR) based on SOR, Last accepted rates based on non-SOR items, new items which did not find place in preceding contracts, Cost of work, Tender documents cost: Earnest Money Deposit (EMD) & finalisation of the tender in time stipulated in the tender documents, EMD through Regulation for Tenders and Contracts, Earnest Money Deposit by PSU, Finalisation award of tender within stipulated time, precautions to be taken, may calling for extension of validity period ii 31-61 31 31-32 32-36 36-37

37-40

3.6

3.7

3.8 3.9

3.10 3.11

3.12

3.13 3.14

become inescapable, Adjustment of Earnest Money towards security deposit, Form in which Earnest money to be deposited, Schedule for timely finalisation of the tender: Eligibility criteria, no specific eligibility criterion prescribed for the works costing `20 lakh or less, Technical Eligibility Criteria, The documents as listed hereafter shall be specified for submission along with the tender, Financial eligibility criteria, Eligibility criteria specific to Joint Venture firms, Technical eligibility criteria for JV firm, Financial eligibility criteria of JV firms, Documents to be enclosed by the Joint Venture firm: Schedule for execution of work: Turnkey contract and its Schedule for execution and use of material, Work content has to be detailed and quantified, Cost of Turn Key Contract work, cost of work schedule covered under SOR, cost of work schedule covered under non-SOR, cost of work schedule to cover balance part of the work, material to be supplied by railway procurement of the material through works contract, Specifications for execution of work, Specifications for each material to be used by the contractor, Authority for inspection of material, Planning & designing if entrusted to the contractor, Planning and designing done by railways in-house resources, include planning and designing in the work contract, planning & designing done by railway through outside organisations, planning and designing done availing PMC, Milestones for payment: Conditions of contract, General Conditions of Contract (GCC), Special Conditions of Contract (SCC): Artificial Splitting work for floating of tender, Further considerations dictate splitting or uniting the work, artificial splitting defined: Works contract tender notice, Circulation of the tender notice, Tender notice on Internet, Inter railway circulation of the Tender notice, Short tender notice, Availability of tender documents before issue of tender notice, Information to be provided in the tender notice, A typical Tender Notice, The typical sample tender notice: Prequalification of tenders, Civil Engineering works, Electrification works, Signal & Interlocking works: Invitation of prequalification bids:

40-43

43-47 47-49

49-54 54-55

55-56

56-60 60-61 61

iii

Pramod P. Goel

Tenders, contracts and arbitration B) 3.0 3.1 SECOND IN-HOUSE PROCESS FIRST STEP: Second in-house process of receipt & evaluation of bids, first step: Receipt of tenders, Receipt of tenders by post, Transparency in dealing with tenders, typical situations, Unscrupulous and antisocial elements, late tenders, Delayed tenders, Receipt of lone tender: Opening of tenders, two packet system, Opening of main packets, Credential bids shall be opened first, Opening of price bids, single packet system: Comparative statement and Briefing note, under two packet system, under single packet system: Purchase preference: SECOND IN-HOUSE PROCESS, SECOND STEP: Second in-house process of evaluation of bids, second step: Constitution of tender committee, Constitution of the tender committee for works contract: Tender committee recommendations (TCR), Commandments for the tender committee: Evaluation of the bids, Evaluation of the bids under two packet system, Evaluation of credential bid, Evaluation of price bid, Evaluation of the bids under single packet system, Fixing of Estimated cost of the work, Discussing the offer, Evaluation of bidders for validity, Evaluation of individual items of schedule, Evaluation of overall cost basis, Reasonableness of rates, fundamental reason for recommending reasonableness, Unworkable rates, Negotiations, tenderer to be addressed as, Counter offer, Offer to be examined for vitiation, Formation of cartel: SECOND IN-HOUSE PROCESS, THIRD STEP: Acceptance of Tender Committee Recommendations TCRs), under two packet system of tendering, under single packet system of tendering, Recommendations for negotiation Final recommendations, unanimous or with a note of descent: Power for acceptance of tender committee recommendations within the zonal railways, delegation of powers: Decision by Accepting Authority on TCR: Tenders to be accepted by Railway Board members or Minister of Railways: 61-67 61

61-64

3.2

64-66 66 67 67-77 67 67-68 68-69

3.3 3.4 C) 3.0 3.1 3.2 3.3

69-77 77-90

D) 3.0

77

3.1

3.2 3.3

77-78 78-79 79

iv

3.4

3.5 3.6

3.7 3.8

3.9

Letter of Acceptance (LOA), Provisions of Indian Contract Act on conditions for revocation of the offer & its acceptance, Delivery of the LOA, Revocation of proposal and acceptance, Clause 5 of The Indian Contract Act, Letter of Acceptance, acceptance by the tenderer, Security Deposit (SD), clause 16(1) Security Deposit of GCC, Performance guarantee, Performance guarantee by railway owned PSUs under single Tender, procedure for obtaining performance guarantee, Incentive Bonus Payment: Agreement & contract, signing on agreement on behalf of President of India: Codal provisions of the Indian contract act 1872, Contract, What agreements are contracts, Consent & Free consent, Parties competent to contract, Coercion defined, Undue influence defined, Fraud defined, Misrepresentation Defined, Mistake - Agreement is void where both parties are under mistake as to matter of fact, Void agreement: Documents forming integral part of the contract: Discharge of tender, Discharge of tender when work is no more required to be executed, When the tender can not be accepted due to higher rates, When the tender can not be accepted because of unacceptable terms and conditions, repercussions of discharging tender, retendering: Dispensation of tender; procedure, Procedure for calling quotations and finalising them for award of work:

79-84 84-85

85-87 87-88

88-89 89-90

CHAPTER-III; PROCESS OF TENDERING & ENTERING INTO CONTRACT: 91-99 SECTION II; PROJECT MANAGEMENT CONSULTANCY CONTRACTS BY RAILWAYS: 91-99 3.0 Project Management Consultancy Contracts: 91 3.1 Guidelines for implementation, Limited, trial based PMC, PMC to be Contract based, PMC for supervision of work only, Deployment of specialists, Two-packet system of tendering, Methods of selection, Quality and Cost Based Selection (QCBS), Combined Quality Cum Cost Based Selection (CQCCBS), Different Consultants for Pre & Post Contracts, PMC Consultant to work in the capacity as Engineers representative, Consortium members not entitled to take execution and consultancy in the same project, Joint Ventures entitled to undertake PMC, Consultant to be instrumental in measurement and bills for payments to the contractor executing the work, Recording of hidden items of work to be done in v Pramod P. Goel

Tenders, contracts and arbitration presence of Railway Supervisors: For hidden items, Project Engineer to be deployed by railway: Railway shall deploy an engineer, Excess billing, Insurance by the Consultant against failures, Control on variation in quantity, Performance Guarantee, Payments to the Consultant, For quality assurance, work tender shall be provided with PMC, Allocation of funds for PMC, Amendments to the Codal provisions in Engineering & Finance Codes on account of introduction of PMC, Cost of PMC not to exceed D&G charges, PMC tenders to be finalised by officer(s) not below the Senior Administrative Grade (SAG) rank, PMC personal with inadequate experience, to be trained at IRISEN: Qualifying criteria, Minimum qualifying criteria for offer, Technical eligibility, Conditions for Technical eligibility, eligibility assignment, Evaluation of the technical offer, Eligibility for key personnel, List of Key personal, Scoring criteria for evaluation of Technical offer, Short listing of technically eligible offers, Financial Eligibility criteria, Conditions for financial eligibility, Evaluation of the financial offer: Evaluation, method of scoring and criteria, Quality and Cost Based Selection (QCBS) method, Combined Quality Cum Cost Based Selection (CQCCBS) method, Selection of the valid tenderer; Under QCBS method, Under CQCCBS method:

91-94

3.2

94-98

3.3

98-99 100-113 100-101

CHAPTER-IV; POST CONTRACTUAL MATTERS: 4.0 Post contractual matters: 4.1 Financial Advance, General conditions for granting Advance, Rate of interest, Recovery of Advance if granted, Mobilisation advance, Rate of Interest on the mobilization advance paid, Recovery of the mobilisation advance, Advance against Machinery and Plant, Rate of Interest on the advance paid against Machinery and Plant, Recovery of the advance against Machinery and Plant, Acceleration Advance, Rate of Interest for acceleration Advance: 4.2 Measurement and payments to the contractor, Measurement book, Measurement, canons of measurement, Payment to the contractor: 4.3 Variation in scope of the work, Variation in existing items of schedule or introduction of new schedules of work, Variation in existing quantities of work schedules, Addition of new items of work schedule, Financial implications of Variation, In case of work schedule based vi

101-102

102-104

4.4 4.5

4.6

4.7 4.8 4.9

tender, In case of turnkey tender, Variation with increase or decrease within 25% of the contract value, Variation beyond 25% on higher side, Variation beyond 25% on negative side, Variation when tender is accepted at zonal railway level or below, Variation when tender is accepted by Railway Board Members or Minister of Railways: Vitiation of the contract: Date of completion of the work, Extension of date of completion without liquidated damages, Extension of date of completion with liquidated damages, Completion of the work: Failure of contract, Determination of contract owing to default of contractor, Right of railway after rescission of contract owing to default of contractor, Rescinding and Risk & Cost/ Performance guarantee, Determination of Contract owing to non-performance and not applying for Extension for date of completion, Revival of the contract within 48 hours after issue of termination notice: Maintenance of confidential reports of contractors: Disputes, dispute defined: Arbitration initiation of:

104-106 106-107

107-108

108-112 112 112-113 113

CHAPTER-V; CONDITIONS OF CONTRACT: 114-136 5.0 Conditions of contract: 114 5.1 General Conditions of Contract (GCC), GCC Part- I, Regulations for Tenders and Contracts, GCC Part- II, Standard General Conditions of Contract: 114-118 5.2 Special Conditions of Contract (SCC), Clauses complimentary and supplementary to the GCC, inserted into SCC, Stipulations which prevail, provisions of SCC shall prevail, Railway offices & address for correspondence, Scope of Work, Agreement, Force Majeure, Security Deposit, Performance guarantee & its refund, Programme of the work, Determination of Contract owing to default of contractor, Contractors liabilities for costs and damages withholding and lien in respect of sums claimed, Lien in respect of other contracts, Contractors liabilities for cost and damages, Stores to be supplied by railway, Recovery of cost in respect of excess unused Railway materials not returned by the contractor, No extra charges towards carriage, Indemnity bond and standing bank guarantee against materials supplied to contractor, Place at which the material is to be issued by railway to the contractor, Insurance of material issued by Railway to the contractor for execution of the work, policy or policies of insurance vii Pramod P. Goel

Tenders, contracts and arbitration against all liabilities of the contractor or the Railway, policy or policies of insurance for all materials handed over to him, Railway a beneficiary, Stores, measuring instruments and other tools and plants for execution of work to be supplied by contractor, Financial Advances admissible to the contractor, Access to the work site, Site clearance at the end of work, Guarantee/ Maintenance, Use of railway land, Use of electricity, Water charges, Variation in Scheduled Quantity, Final acceptance, Measurement, Payment, On-account payment, Separate bill for item/ sub item, On-account payment for supply of items, Payment not to exceed 95% of total payment due, Certificate to be given with submission of bills, Final payment, Site clearance, Components and materials received for work, Arbitration; Demand for Arbitration; Place of arbitration; Appointment of arbitral tribunal & arbitral award, Right of railway to keep back from the contract any portion of work, Recovery for delay in completion, Price Variation, Applicability of price variation, Price variation during extended period of contract, Adjustment for variation in prices, Percentage of labour components, material components, fuel components in various types of works, Engineering Organization: CHAPTER-VI; ARBITRATION AND CONCILIATION: 6.0 Disputes, Arbitration Act, arbitration panel and process of arbitration: 6.1 Disputes & claims, Clause 63 of the GCC, Excepted Matters: 6.2 Arbitration Act & Arbitration: 6.3 Arbitration Agreement & Appointment of Arbitration Tribunal, Arbitration Agreement, Arbitration Act 1916, Appointment of Arbitration tribunal, Commencement of Arbitral proceedings, Cost of Arbitration process, Place of arbitration, Conduct of the tribunal members and decision making, Conduct of the tribunal members, Conduct of the tribunal members from railways, Decision making by the tribunal members: 6.4 Process of arbitration, Hearing and proceedings, the arbitral tribunal holds competence to rule its own jurisdiction, Failure of any party in cooperating & repercussions thereof: 6.5 Arbitral award & termination of proceedings, Arbitral award contents and the format, Termination of arbitral proceedings, Settlement, Finality of the arbitral award viii

118-136 137-151 137 137-138 138

138-140

140-143

6.6 6.7 6.8

6.9 6.10

and associated Arbitration Acts, Enforcement and associated Arbitration Acts: Application for setting aside Arbitral Award & Limitations: Some real life cases, Case-1, Case-2, Case-3, comparison of cases: Arbitration and conciliation Act 1996; Part II, enforcement of certain foreign awards, New York convention awards, Geneva Convention awards, Enforcement of foreign awards: Arbitration and conciliation Act 1996, Part III; Conciliation: Arbitration and conciliation Act 1996, Part IV; Supplementary provisions:

143-145 145-146 146-149

149-150 150-151 151 152-159 152

CHAPTER-VII; CONTRACTS & VIGILANCE: 7.0 Canons of financial proprietary, paragraph116 if Finance Code Volume-I: 7.1 What and is Why of vigilance, Corruption, Corruption of Humans & values: Merriam Webster dictionary, Defines word corrupt, Corruption of systems and material, Agencies monitoring corruption over world: 7.2 Vigilance commission, Organisation of Vigilance Commission, Secretariat of Vigilance Commission, Chief Technical Examiners' (CTE) Wing, Commissioners for Departmental Inquiries (CDIs), Railway Board, Each Zonal Railway: 7.3 The cause and the procedure of vigilance, Major causes of concern of the vigilance, procedural mistake, Overstepping powers, callousness, malafide intentions causing loss to government or not: 7.4 Government employees and the procedure of vigilance, Routine Checks by vigilance organisation, Complaints against an individual or the group of railway officer (s), Taking up of Audit inspection reports, draft paragraphs by vigilance: 7.5 Process of investigation, Enquiry, Information to CVC, Issue of charge sheet, Minor penalty; reply and action, Major Penalty reply and action, Conviction not imminent if innocent: 7.6 Some important features for the reply to be given in case of questions issued by vigilance or charge-sheet issued by the disciplinary authority, Read and understand the contents carefully, Collect facts for the reply, Draft and take help of a friend for reply, Reply in language most comfortable, Be your own self: ix

152-154

154 - 155

155-156

156-157

157-158

158-159

Pramod P. Goel

Tenders, contracts and arbitration Be brief and within the context, Be truthful: Postulates to keep the vigilance at arms length distance, Nothing is secret, Fragrance, Polluted money breeds misfortune, Greed the worst trait:

7.7

159 160-226

ANNEXURES: ANNEXURE-I : The Constitution of India, Chapter- III, Property, Contracts, Rights, Liabilities, Obligation and Suits, Clause- 299, Contracts; RAILWAY ACT 1989, Chapter IV Construction and Maintenance of Works, Clauses- 11 to 20: ANNEXURE-II: Sections 7, 12, 16, 17, 18, 19, 20, 21 & 29 of Contract Labour (Regulation & Abolition) Act 1970: ANNEXURE-III: Joint venture agreement clauses 1, 2 & 3: ANNEXURE-IV: Proforma of Agreement: ANNEXURE - V: Proforma for Contract termination Notice: ANNEXURE - VI: Format for confidential report on contractors: ANNEXURE - VII: Clauses 7, 25, 27, 28 & 64 of GCC reproduced: ANNEXURE VIII: THE ARBITRATION AND CONCILIATION ACT, 1996 [No.26 of 1996][16th August, 1996]: ANNEXURE-IX: Indian Railway, Government of India, Ministry of Railway, Railway Board, Vigilance Directorate, Vigilance Manual- 2006, Chapter -II, CENTRAL VIGILANCE COMMISSION (CVC) : ANNEXURE -X: Format of measurement book and guide lines for filling the same, Record of Measurements: Bibliography : *****

160-165

166-168 169 170-171 172 173

174-178

179-210

211-221

222-226 227

CHAPTER-I
TENDERS, CONTRACTS & ACTS 1.0 Contractual system and Acts: Indian Railways had to absorb huge work force working as casual labour, deployed for retail execution of railways different construction works, continuing for periods spanning over almost their professionally workable life. Railway also decided to reduce its work force @ of 3% per year. With this depleting huge work force for construction works, railway had to resort to contractual system of obtaining different services. This, in affect, tantamount to transferring Railways employment liability to the contractors. 1.1 Contracts for Execution of work and associated Acts: System of work getting executed through contracts is governed by provisions under Constitution of India, Railway Act 1989, Contract Labour (Regulation & Abolition) Act 19701, The Indian Contract Act (Act IX of 1872) and General Conditions of Contract, rules regulations & directives issued by Railway Board (Ministry of Railways) from time to time through circulars. 1.1.1 The system of getting work executed through contracts finds its place under clause 229, chapter-III of Constitution of India, defining Contract, the copy placed at Annexure-I, amongst last pages of this book. An important provision of the Act provides as Neither the President nor the Governor shall be personally liable in respect of any contract or assurance made or executed for the purposes of this Constitution, or for the purposes of any enactment relating to the Government of India heretofore in force, nor shall any person making or executing any such contract or assurance on behalf of any of them be personally liable in respect thereof. 1.1.2 Provisions for Construction and Maintenance of Works finds place under clause 11, Chapter-IV, of the Railway Act 1989, which, deals under sub clauses 11) Powers of railway administration to execute all necessary works, 12) to alter the position of pipe, electric supply line, drain or sever etcetera, 13) protection of government property, 14) Temporary entry, upon land to remove obstruction, to repair or to prevent accident, 15) payment of amount for damages or loss, 16) Accommodation works, 17) Power of owner, occupier, State Government or local authority to cause additional accommodation works to be made, 18) Fences, gates and bars, 19) Overhead bridges and under-bridges and 20) Powers of Central Government to give direction for safety. Details under provisions of the clause may be seen at Annexure- I, amongst last pages of this book.
------------------------------------------------------------------------------------------------------------------------------1

Received assent of the President of India on 5.9.1970; Published in Gazette of India on 7.9.1970

Pramod P. Goel

Tenders, contracts and arbitration 1.1.3 It is not possible to deal with the contracts in isolation without catering for huge involvement of labour governed by Contract Labour (Regulation & Abolition) Act 1970. Some important provisions of the Act under Section 7: Registration of certain establishments, Section 12: Licensing of contractors, Section 16: Canteens, Section 17: Rest-rooms, Section 18: Other facilities, Section 19: First-aid facilities, Section 20: Liability of principal employer in certain cases, Section 21: Responsibility for payment of wages and Section 29: Registers and other records to be maintained of the Contract Labour (Regulation & Abolition) Act 1970 are placed at Annexure-II amongst last pages of this book, which may be referred to for detailed provisions of these sections. 1.2 Contract for procurement of material for issue to the contractor: Although railway owns its workshops and manufacturing units but many type of materials, testing instruments and other equipments are required to be procured from market where vendors work similar to as ancillary, to railways for regular supply in conformity to the specific requirements and specifications issued by the railway. The setup of ancillaries is such that Research Design Standardisation Organisation (RDSO) of Indian Railways approves vendors for supply of such important and safety related material manufactured by them in conformity to the given specifications, who are financially strong enough correspondingly. A tender for the work or material may be invited only when the work is sanctioned and adequate funds are provided to the organisation during the period for which work is to be executed. Department of Finance shall be provided with such information while initiating such a proposal. Private and public agencies with adequate experience of execution of works which are required to be executed for railways as well as are financially capable, are invited to undertake such works or supply of material or both. Such agencies furnish details of their experience in the field of work, their financial capability and the cost of proposed work, to the railway. This offer, by the agency, is termed as tender. 1.3 Tenders defined: Besides many meanings of Tender, in the dictionary, it is to make an offer to carry out work. Therefore, a works tender is the offer for service or supply or both, by an agency for carrying out the work. The stores tender is offer for supply of material. Tenders are invited by railways to cope with the requirement whatever it may be. 1.4 Contract & Act: Once the eligible tenderer is established as acceptable, as evaluated by a tender committee and accepted by the accepting authority, the bidder is advised accordingly, by issue of, unconditional/condition(s) agreed between the railway and the bidder through Letter of Acceptance (LOA) with the request to return one signed copy of the LOA and also to sign the agreement, within specified time. 2

With the issue of LOA by the railway, the agreement is deemed to have been established, between railway and the bidder making it a legal contract. However formal agreement is drawn after acceptance of LOA by the bidder within a specified period. Accordingly contract is an agreement between persons, groups or states to supply goods or to execute work. With reference to such agreement between Railway and the party considered suitable to supply goods or do the work or both; the word contract is used for such Business contract. In present context the contracts are for execution of work including/not including supply/part supply of material, used for execution of work. Such contract is called Works Contract as distinguished from Stores Contracts and Labour Contracts. Store Contract is purely for supply of material and Labour Contract is purely for supply of Labour. Refer The Indian Contract act (Act IX of 1872) clause -2, in ensuing paragraphs. Different sets of rules are applicable for Works, Stores and Labour contracts. 1.5 Agreement & corresponding Act: The agreement is signed between the eligible bidder, to whom letter of acceptance is issued, and an authority, usually below the rank of the accepting authority, on behalf of the President of India. This makes the bidder a contractor. All future correspondence is to be addressed by the contractor to the authority who signed the agreement or a person nominated to be addressed, by railway. Refer The Indian Contract act (Act IX of 1872) clause -2, in ensuing paragraphs. Besides various provisions, under Constitution of India, Railway Act and Labour (Regulation & Abolition) Act 1970, tender and contract rules are also governed by the Indian Contract Act (Act IX of 1872). 1.6 The Indian Contract Act (Act IX of 1872): The Act may be called The Indian Contract Act, 1872. The law of contract is to ensure that what has been promised to the employer shall be performed. The act applies to whole of India except Jammu And Kashmir State. 1.6.1 History & references: There was no law on contracts in India during British rule. The Supreme Court of India adopted the law on contract with minor modification prevalent in England in 1872. The Indian contract act came in force on 1st September 1872. While the act provides certain elementary conditions for becoming binding on parties between whom the contract has been made, it does not detail any conditions or procedure under which the contract shall be executed. The act covers 238 sections. References on contract may also be found under The Constitution of India, clause 299 and Railway Act 1989 chapter IV, clause 11 to 19, Annexure-1, placed amongst last pages of this book. 3 Pramod P. Goel

Tenders, contracts and arbitration 1.6.2 Clause 2 -Interpretation clause: in this clause words and expressions are defined as follows: Proposal: The proposal of one persons willingness to do or abstain from doing any thing with a view of obtaining others assent is termed as proposal. This is same as an offer. 1.6.2.2 Acceptance & Promise: When assent is given to the Proposal by the person representing President of India, the proposal is deemed to have been accepted and such acceptance becomes the Promise. It is similar to issue of Letter of Acceptance. 1.6.2.3 Promisor and Promisee: The person making the proposal is the Promisor and the person accepting the proposal is the Promisee. 1.5.2.4 Consideration: To act on the promise by the Promisee or any other person is termed as Consideration for the promise. 1.6.2.5 Agreement: Every Promise or set of promises forming the consideration is termed as Agreement. 1.6.2.6 Reciprocal promises: The promises which form the Consideration or a part of the Consideration for each other are called as Reciprocal promises. 1.6.2.7 Void agreement: Agreement not enforceable by law is termed as Void. 1.6.2.8 Contract: An agreement enforceable by law is a Contract. 1.6.2.9 Voidable contract: Agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of others, is a voidable contract. 1.6.2.1 1.7 Type of Tenderers: Tenderers may be i) Individual/ Proprietorship or a Partnership firm, ii) Limited Liability Partnership (LLP) Firm iii) Company, Single or Partnership or iv) Joint Venture (JV) firm. Each group has its legal status different to others. 1.7.1 Firms: An individual as a sole proprietor or individuals and /or persons may join together either as an association of persons, body of individuals, partnership firms or even as a limited liability partnership organization either under a written agreement or it may even be an oral understanding to transact a business under a distinct name, open a current account in a bank and register with different authorities like the Income Tax (IT) department, Trade Tax department, Customs and Central Excise department and Service Tax (ST), Labour Commissioner, etcetera as and when applicable depending upon the turnover and type of business, etcetera. The firms may be broadly classified as i) Proprietary, ii) Partnership and iii) Limited Liability Partnership (LLP). 1.7.2 Proprietorship Firm: When a person undertakes business as an individual, it is known as the proprietorship firm. The individual is known as the proprietor. Such a firm has to register itself with Value Added Tax (VAT) authorities, Service Tax department and obtain a separate registration number (if 4

the business scheduled to be undertaken by the firm is covered). For Income Tax there is no separate registration for each individual business undertaken by the proprietor and his total income from all sources is assessed to tax; however, in many cases Income Tax is deducted at source by the person making the payment as a given percentage of the amount payable. In such case, the proprietor is essentially required to have a Permanent Account Number (PAN). In case of Proprietary firm, the liability to pay tax lies solely on the proprietor, the implication being, in case of tax accrual or any penalty or any other such liability, it shall be borne by the proprietor himself. 1.7.3 Partnership Firm: In case of a Partnership firm two or more persons join together to form a partnership firm for which a partnership agreement with clear status about sharing of investment, profit and liabilities and business to be transacted by the firm is drawn on non-judicial stamp paper of requisite value which varies from state to state. It may be registered with the Registrar of Firms but is not mandatory. Such partnership firm shall also have to register themselves with VAT, ST & IT departments. In this case the firm shall have its independent current account with a bank as well as a PAN card. The partners shall be entitled to draw salary from the firm on an agreed basis and shall also be entitled to interest on their capital invested in the firm at a given percentage as well as share profits of the partnership business in the proportion as per agreement. In such partnership firm the liability shall lie jointly and severally upon the partners; however in case one or more members are not able to discharge their liability, it shall be discharged by the remaining partners, under the implication of several liability. 1.7.4 Limited Liability Partnership (LLP) Firm: A new concept of organization has been introduced with the passing of `Limited Liability Partnership Act, 2009. LLP is a hybrid arrangement between a partnership firm and a company and is required to be registered with the Registrar of LLPs situated at New Delhi. It has an independent existence just like an incorporated company. The liability of the partners is limited and is restricted vis--vis the acts of the other partners. 1.8 Company: A company is one which is registered under the Companies Act, 1956. A firm may be converted into a Company with the same name as that of the firm or with another name or a new Company may be established with a name, which is not already registered by any other Company in the country, on the date of registration, after following the laid down procedures. Once the name is finalised the company shall be registered with the Registrar of Companies after filing of the necessary documents for incorporation. Registration for VAT, TIN, IT and Labour Commissioner shall have to be done similar to as in case of firms. Company can be formed to transact one or more business as laid down in its object clause. 5 Pramod P. Goel

Tenders, contracts and arbitration The Board of Directors, as appointed by the shareholders in the general meeting, manages the business of the company assisted by a team of staff such as General Managers, Mangers and Accountants etcetera. The Company adopts a Memorandum of Association which is divided into five clauses, namely, Name, Registered Office, Liability, Objects and Capital, while, the Articles of Association contain the internal rules and regulations for day to day management of the company. The company may be i) Private Limited or ii) Public Limited. 1.8.1 Private Limited Company: There is restriction on the maximum number of members which cannot exceed fifty and also on the transferability of the shares. The procedures contained in the Companies Act with respect to the private limited companies are less cumbersome, flexible with a lot of exemptions. 1.8.2 Public Limited Company: A company which is not a private company. There is no limit on the number of shareholders who can form a Public Limited Company. There is also no restriction on the transfer of members shares. 1.9 Change of Firm/ Company name by the tenderer and retention of credentials: A company name can not be changed once allotted while a firm can change its name while being in the same capacity or while getting converted into a Company provided that, i) the proprietor, in case of a Proprietorship firm or, members in case of Partner ship firm do not change and ii) the business being transacted by the firm continues to be the same. The Firm shall inform, in writing, of the change in name to all its clients. 1.10 Firm or Company as Subcontractor: Work with multidimensional scope is managed by the contractor, who has entered into agreement with the railway, by obtaining assistance from one or more contractors specialised in different disciplines; such contractor(s) are termed as subcontractor(s). Subcontractors are engaged and paid by the main contractor, under written information to the client/railway, who may like to satisfy his credibility/capacity for the work assigned to the subcontractor. For the sake of example, if the work involves construction of a building (relay room) to accommodate and to provide signal Interlocking system, lay the cable in the yard, erect signals and apparatus cases in the yard, carry out wiring in the apparatus cases and in the relay room, the group competent to cast foundations for the signal posts & apparatus cases shall be different than the group to construct the building for relay room. Contractors with the expertise in cable laying, casting foundations for signalling system and contractors erecting relay room shall be different with expertise in the given area. Out of this, the main contractor may be having expertise in the job for which the contract is primarily awarded, say for 6

wiring and installing interlocking system, shall retain up to himself and shall seek help of subcontractors for other jobs. 1.11 Joint Venture (JV) Firm: For works which are financially larger and/or the work require multidimensional expertise, it may not be possible to undertake the work single handed by a company/firm. Under such situations two or more companies/firms, when combined together are capable to undertake the work technically and financially, join hands temporally for the given work. Such alliance is Joint Venture. A joint venture (JV)1 is a legal entity formed between two or more parties to undertake an economic activity together. It is a term more restricted to the US and the 'new' countries on the world map such as India and China. The JV parties agree to create, for a finite time, a new entity and new assets by contributing equity. They then share in the revenues, expenses, and assets and "control" of the enterprise. The term is not used in the U.K. wherefrom 'company law' originates. In European law, the term 'joint-venture' is an elusive legal concept, better defined under the rules of company law. In France, the term 'joint venture' is variously translated as 'association d'entreprises', 'entreprise conjointe', 'co-entreprise' and 'entreprise commune'. But generally, societe anonyme covers foreign collaborations. In Germany, 'joint venture' is better represented as a 'combination of companies' (Konzern). The venture can be for one specific project only - when the JV is referred more correctly as a consortium (as the building of the Chunnel) - or a continuing business relationship. The consortium JV (also known as a cooperative agreement) is formed where one party seeks technological expertise or technical service arrangements, franchise and brand use agreements, management contracts, rental agreements, for one-time contracts. The JV is dissolved when that goal is reached. A consortium1 is an association of two or more individuals, companies, organizations or governments (or any combination of these entities) with the objective of participating in a common activity or pooling their resources for achieving a common goal. Consortium is a Latin word, meaning 'partnership, association or society' and derives from consors 'partner', itself from con- 'together' and sors 'fate', meaning owner of means or comrade.

-----------------------------------------------------------------------------------------Wikipedia, the free encyclopedia1

Pramod P. Goel

Tenders, contracts and arbitration 1.11.1 Participation of Joint venture firms in works tenders of value more than five crore: Railway Board under their circular number 2007/CE.1/CT/37, dated 02.09.2008 have issued guidelines on the subject of participation of Joint venture firms in works tenders of value more than five crore, salient features being: i) ii) Joint venture firm/company shall have a separate identity/name. Number of members in the joint Venture firm shall not be more than three if the work involves only one department however it may extend to five if the work involves more than one department. A member of the JV firm shall not be permitted to participate either in his individual capacity or as a member of another JV firm in the same tender. The tender form shall be purchased in the name of JV and not in the name of any of the constituents. Earnest Money Deposit (EMD) shall be submitted in the name of the JV and not in the name of any of the constituent member. However, in exceptional cases EMD may be submitted by the leading member of the JV, subject to submission of special request letter from lead partner stating the reasons for not submitting the EMD in the name of JV and giving written confirmation from JV partners to the effect that EMD submitted by the lead partner may be deemed as EMD submitted by the JV firm. One of the members of the JV shall be the lead member of the JV firm who shall have a majority i.e. at least 51% share of the interest in the JV firm. The other members shall have a share of not less than 20% each in case JV firm with up to three members and not less than 10% in case of JV firm with more than three members. In case of JV firm with foreign members, the lead member has to be an Indian firm with a minimum share of 51%. A copy of the Memorandum Of Understanding (MOU) executed between the JV members shall be submitted by the JV firm along with the tender. The complete details of the members of the JV firm, their share and responsibilities in the JV firm etcetera particularly with reference to financial, technical and other obligations shall be furnished in the MOU on the format enclosed with the tender papers. It shall not be possible to modify/alter/terminate the MOU after submission of the tender till the validity of the offer. In case the tenderer fails to observe/comply with this stipulation, the full Earnest Money Deposit shall be forfeited. In case of successful tenderer, the validity of the MOU shall be extended till the currency of the contract expires. Approval for change of constitution of the JV firm shall, at the sole discretion of the railways, may be allowed when modification becomes inevitable due to succession law or any other such complication, and in any case the minimum eligibility criteria should not get vitiated as well 8

iii)

iv) v)

vi)

vii)

viii)

ix)

x)

xi)

xii)

xiii)

xiv)

as the lead member of the JV firm should continue to be so, failure of which shall render the tender invalid. Similarly after the contract is awarded, the constitution of the JV firm shall not be allowed to be altered during currency of the contract except when the modification become inevitable to succession law etcetera and in any case the minimum eligibility criteria should not get vitiated. Failure to observe this stipulation shall be deemed to be breach of contract with all consequential penal action as per contract. On award of the contract to the JV firm, a single Performance Guarantee shall be required to be submitted by the JV firm as per tender conditions. All the guarantees such as Performance guarantee, , Bank guarantee for mobilisation advance, machinery advance etcetera shall be accepted only in the name of JV firm and no splitting of the guarantees amongst the members of the JV firm shall be permitted. On issue of LOA, an agreement amongst the members of the JV firm has to be executed and got registered before Registrar of the Companies under Company Act or before the Registrar/Sub-Registrar under the Registration Act, 1908. This Agreement shall be submitted by the JV firm to the Railways before signing of the Agreement for the work. This agreement shall be an integral part of the contract and in case of failure to do so, the Earnest Money shall be forfeited and other penal action shall be taken against the JV and its partners. This JV agreement shall have clauses as specified by the Railways (See Annexure-III, placed amongst last pages of the book). Joint Venture members shall authorise one of the members on behalf of the JV firm to deal with tender, sign the agreement or enter into contract in respect of the said tender, to receive payment, to witness joint measurement of the work done, to sign measurement books and similar such action in respect of the said tender/contract. All notices/ correspondences with respect to the contract would be sent only to this authorised member of the JV firm. No member of the JV firm shall have right to assign or transfer the interest right or liability in the contract without the written consent of the other members and that of the employer (railways) in respect of the said tender/contract. ****

Pramod P. Goel

Tenders, contracts and arbitration

CHAPTER-II
TENDERS & TYPE OF SERVICES 2.0 Tenders: Progress of an organisation invites regular addition, improvement and modification to the existing layouts. All equipment provided for running of the train need time bound replacement to maintain them in good health. All these activities require small to big works. With the reduction in railways work force and requirement arising for skills, different for different type of works agencies from outside railways, with suitable expertise in the type of work required as well as financially capable, are invited. The offer of their services for execution of such works, by the agency, as required by the railway, is termed as tender. The offer is also called bid. 2.1 Type of tenders: Different type of works required to be done are classified based on the i) purpose and ii) system of calling for tenders. 2.1.1 Type of tenders based on purpose: The requirement may be either execution of work or procurement of material, or procurement of labour only. The execution or procurement shall be: 2.1.1.1 Execution of works of: i) General nature. ii) Nature specific to Railway requirement. iii) Labour oriented only. iv) Consultancy contracts. 2.1.1.2 Procurement of material. 2.1.1.3 Procurement of labour. 2.2 Execution of work: The services required are grouped as i) execution of work for which major material specific to technical requirements of the work, is supplied by railways and part supply of material of general use, by the contractor, ii) turn key execution of work with supply of all material required for completion of work, by the contractor and iii) special purpose works with part supply of associated material by the railway or turn key work. 2.2.1 Execution of work where major material specific to technical requirements of the work is supplied by railways: Bulk procurement of stores is always economical with uniformly good quality, to railways and accordingly a separate directorate is installed in Railway Board for regulation of such purposes. Railway Board has identified material of significance for procurement of listed items from vendors placed on the list of suppliers, approved by RDSO. The list of suppliers approved by RDSO is maintained as part-I and Part-II. Vendors which are first time entrant onto the list of approved suppliers of RDSO are placed on part-II list only. The suppliers who are considered competent 10

technically as well as capable financially, upgraded from Part-II of the list are put on Part-I depending upon their performance. The order for full quantity of material can be placed on vendors placed on part-I, if no vendor is there placed on part-II list. However in case, a vendor placed on part-II list is available for the same material, the order for 15% of the total quantity of the material may also be placed on Part-II listed vendor; however in case of the purchase, under any of the previous orders, supplied by the Part-II listed vendor, happens to be equal to or more than the total quantity of the material ordered on to the vendors listed on Part-I & Part-II combined together, the order may be placed on Part-II listed vendor for up to 25% of the of the quantity of the material being procured through vendors placed on Part-I & Part-II lists combined together. For example, if 15% order on Part-II listed vendor happened to be 50 in quantity, of any of the previous orders, and the next total order placed on vendors listed on Part-I & partII combined together, in question happens to be less than or equal to 50, 25% of the total quantity may be ordered on vendor placed on Part-II list. In such case the material required for execution of the work is procured well in time before the contractor for execution of the work is placed in position, through stores department of railway. The store of general usage which is available in good quality in the market, such as bolts and nuts, apparatus cases and other material required for installation, is provided by the contractor, under given specifications. The cost of such material is included into the cost of work by the contractor. However procurement of material takes its own time and shall delay the project if timely action is not taken or the work is of priority. 2.2.2 Execution, where the contractor has to complete the work ready to be used i.e. Turn Key contract: Under the eventuality when execution of the work is to be carried out within a limited time and the material required for execution is not in place or not likely to be in place, by the time the contract is awarded, the tender is invited with supply of the material required for technical usage along with other material to be provided by the contractor. Contracts for such works are known as Turn Key. It is akin to purchasing a car where only ignition key is required to be turned to be on road. Under turn key works the user shall takeover the work ready in all respects for immediate use. 2.2.3 Special purpose works: Civil Engineering, with reference to construction of buildings is one of the most ancient and it shall be easy to find contractors for such works, however people competent to carryout works related to signal engineering are relatively less. Telecommunication with specific reference to mobile communication i.e. GSM Railway (GSMR) is limited to fewer contractors. Over the period contractors have been undertaking work of installation of Electronic Interlocking (EI) while supply and commissioning of EI is confined to limited vendors that too foreign based. Accordingly such works are highly specialised or special purpose in nature. 11 Pramod P. Goel

Tenders, contracts and arbitration 2.3 Labour oriented works; labour contracts: The works which are nontechnical and are predominantly labour oriented where involvement of artisans is not there, such as making trench for cable laying and laying of cables therein, manual ballast packing of track, doing earth work such as making bed for laying of track or supporting foundations of apparatus cases, earth work for OHE masts or trestles supporting signalling systems rod run, are executed through Labour contracts, governed by The Contract Labour (Regulation and Abolition) Act, 1970, Act No. 37 Of 1970. Pure labour contracts are rarely put in practise by railway. Section 10, Prohibition of employment of contract labour, of the Act reads as: (1) Notwithstanding anything contained in this Act, the appropriate Government may, after consultation with the Central Board or, as the case may be, a State Board, prohibit by notification in the Official Gazette, employment of contract labour in any process, operation or other work in any establishment. Before issuing any notification under sub-section (1) in relation to an establishment, the appropriate Government shall have regard to the conditions of work and benefits provided for the contract labour in that establishment and other relevant factors, such as: (a) Whether the process, operation or other work is incidental to, or necessary for the industry, trade, business, manufacture or occupation that is carried on in the establishment; (b) Whether it is of perennial nature, that is to say, it is of sufficient duration having regard to the nature of industry, trade, business, manufacture or occupation carried on in that establishment; (c) Whether it is done ordinarily through regular workmen in that establishment or an establishment similar thereto; (d) Whether it is sufficient to employ considerable number of wholetime workmen.

(2)

Explanation- If a question arises whether any process or operation or other work is of perennial nature, the decision of the appropriate Government thereon shall be final. In consideration of the fact that a work of perennial nature i.e. of repetitive and regular nature, required to be executed round the year attracts regular employment. Labour contract for such work shall violate provisions, of Contract labour (R&A) clause of the Act. Further more, owing to repeated complaints from various forums including Participation of Railway Employees in Management (PREM) at the apex level, of the violation of the Contract labour (R&A) Act 1970, by railways Railway Board, as per their circular number E(LL)2005/AT/CNR/64 dated 10.11.2005, issued that Board is of the view that the personal branch of the Railway being the custodian 12

of Labour Laws should invariably be consulted before any department of the Railways/Production Units contemplates any activity being contracted out in terms of the Contract Labour (Regulation & Abolition) Act, 1970. This measure would help in ensuring that there are no violations of the said Act. It has been elaborated further as: Contract Labour is a term applied to labour when they are employed to perform some work, and have no direct employer-employee relation with the party called principal employer, for whom that work is ultimately done. The relationship between the principal employer for whom the work is done and the workers who actually do the work is mediated by one or more other parties who actually employ the workers, pay them and have an employer-employee relationship with them. The parties who act as intermediary between the principal employer and the workers are called Contractors and their relation with the principal employer is governed by a contract between them. This system of work being done for a principal employer through one or more contractors is termed as contract labour system. The Contract labour (Regulation and Abolition) Act 1970 is an important piece of social legislation which seeks to regulate the employment of contract labour and where necessary to abolish the same. It is thus legislation for the welfare of labourers whose conditions of service are not at all satisfactory. The primary object of the act is to prevent the exploitation of the contract labour by the contractor of the establishment. From the provisions it is apparent that the framers of the Act have allowed and recognized contract labour and they have never purported to abolish it in its entirety. Before contracting out any activity, the railway must consider the following: i) Whether the process, operation or other work is incidental to, or necessary for the industry, trade, business, manufacture or occupation that is carried on in the establishment; Whether it is of perennial nature, that is to say, it is of sufficient duration having regard to the nature of industry, trade, business, manufacture or occupation that is carried on in that establishment; Whether it is done ordinarily through regarding workmen in that establishment or an establishment similar thereto; Whether it is sufficient to employ considerable number of whole-time workmen (Section 10 of the contract Labour Act refers).

ii)

iii) iv)

Since it is legal to engage contract labour the question to resolve is to how to engage the contract labours without violating the Contract Labour (Regulation & Abolition) Act, 1970. In this regard the Principal Employer should ensure that the: i) Contracts labour does only the specific work agreed by the contractor. 13 Pramod P. Goel

Tenders, contracts and arbitration ii) iii) Contractor issues the photo identity card to his workers under his name, trading style and signature. Contractor is not treated as commission agent.

Apart from these pointers the provisions of the Contract Labour Act would have to be necessarily followed. A pitfall that is required to be avoided in perpetuity is what is known as Sham Contract, (A sham contract is a faulty and unviable contract). Clause 55(A)(1) of General Conditions of Contract (GCC), on the subject, stipulates that a contractor shall comply with the provisions of the contract labour (Regulation and Abolition) Central Rules 1971 as modified from time to time wherever applicable and shall also indemnify the railway for and against any claims under the aforesaid Act and the Rules. 2.3.1 Sham Contract: An agreement between the Contractor and the Principal Employer is said to be a sham contract under the following circumstances: i) ii) iii) iv) v) When the agreement does not disclose the name and address of the contractor. When the agreement does not disclose the exact nature of job to the assigned. When the agreement narrates the nature of job other than actually to be performed. When the agreement is against the norms of judicial pronouncement/ statutory provisions. When the agreement is a tool or device to deprive the right of livelihood or is a tool for victimisation or unfair labour practice.

Accordingly a brief synopsis of some of the important Dos is listed hereafter: i) ii) iii) iv) v) Principal employer to get his establishment registered under the Act and the Rules (Section 7). Contractors must get Licences (Section 12). Obligation of Principal Employers to provide certain Amenities to workers (Section 16, 17, 18, 19, 20). Obligations of Principal Employer regarding Payment of Wages (Section 21). Duty to maintain prescribed Registers and Records (Section 29).

Sections 7,12,16,17,18,19,20,21&29 of Contract Labour (Regulation & Abolition) Act 1970 are reproduced at the Annexure-II placed amongst last pages of the book, for ready reference. 14

Once the provision of the Contract Labour (Regulation & Abolition) Act, 1970 are followed and above guidelines are abided by, the contract entered into would be genuine and credible thereby eradicating the question of the Contract Labourers seeking abolition of the Contract Labour System/Regularisation. Railway Board, as per their letter number 2002/CE-I/CA-iii/CT/10 Dated 28/29.10.2002, approved to North East Railway to award of two contracts to labour co-operatives for earth work each costing `25 lakh on trial basis with guidelines as: 1) Labour Cooperative Societies should be registered under the Cooperative Societys Registration Act in proof of these societies being legal entities before they are allowed to participate in the Railway tender. A certificate to this effect should be submitted along with the tender. Earnest Money/Security Deposit is realized as per the existing norms. Eligibility Criteria It may be relaxed to suit local conditions so that Cooperative Societies are able to participate in the tender. A special condition may be provided in the tenders of all works valuing up to an estimated cost of `25 lakh that in case of Labour Cooperative Societies tendering for the work, they will be given the first opportunity to execute the work subject to the provision that they agree to take up the work at the rates as offered in the lowest acceptable tender. Only one contract should be given to one Cooperative Society.

2) 3) 4)

5)

2.4 Consultancy Contracts: In many areas of technical, legal, financial or any other nature where wide range experience snowballs around an individual or the organisation that has been doing similar work with variation, encountering different situations and solving them. Over the period the person or the organisation shall know instinctively an onset of the problem and shall be prepared to face and solve it before the damage is done. Such a person or agency who offers to share his experience and expertise is designated as consultant. Accordingly the consultant may be engaged to chalk out and solve the problem by designing, assisting in designing, developing the required scheme, extend opinion in legal, financial, techno legal or any other such matter. Consultancy has wide scope one of which is used by railways in the form of Project Management Consultancy (PMC). 2.4.1 2.4.1.1 i) Project, Project management & Project Management Consultancy: Project: A work, as soon as sanctioned and appears in Pink Book, becomes a project with its completion date almost decided. The total work may be taken as one project or may be divided into smaller more than one project. 15 Pramod P. Goel

Tenders, contracts and arbitration ii) iii) Each such project may again be awarded to one agency for execution or may further be given to more than one agency. With the increasing requirement for introduction of new systems due to major technological changes and larger projects being undertaken, consequently makes the present strength of officials and the staff to manage the time, money and quality of the project, falls grossly inadequate. This attracts the necessity for an agency, from out side the organisation getting the work executed, for managing the project. Consultancy: The Consultancy for project management is classified into two basic elements: Pre- Award of contract: Further grouped as; a) Survey, Planning and preparation of Tender documents: and b) Assist in award of work to an agency for execution; Post- Award of contract: Further grouped as; a) Management of quality; b) Management of time; and c) Management of cost.

iv) 2.4.1.2 i)

ii)

All of these elements of the project management are interwoven with each other in such a way that separating out any one from the other shall again attract inter discipline coordination thereby forfeiting the basic benefit to be achieved of the Project management. However the management consultancy is availed some times for any one or more than one element. This may be seen featured in Railway Boards guidelines for PMC. 2.5 Project Management Consultancy (PMC) contract by railways: Zonal Railways of late, have been raising the issue of inadequate organization available with them for supervision of various activities connected with execution of projects. Over the years, the outlay for projects and other works have increased considerably without commensurate increase in the strength of supervisory staff. Due to heavy growth in traffic, emphasis is also being given for time bound implementation of projects and other throughput enhancement works. The issue of engagement of Project Management Consultants (PMCs) has been under deliberation in the Board for quite some time and Board (ME & FC) have accorded approval for engagement of PMCs for supervision of projects being executed by the Railways. RVNL is already having PMCs and their document can be a basis for this. Accordingly, Railway Board, vide their circular number 2007/CE.1/CT/18, dated 05.07.2010 have issued guide lines on deployment of PMC, an extract of which is discussed and described under ensuing paragraphs and section-II of Chapter-III of this book.

16

2.5.1 Grouping management consultancy services: It is putting the project management in two major groups, i) prior to award and ii) post award of contract: i) Consultancy for starting from preparation of tender papers, covering Bill of Quantities (BOQ), plans tender conditions etcetera, up to award of Contract; Consultancy and supervision during execution of work for time over run control, cost control, quantity and quality of material control including consultancy for switching over of new system and commissioning.

ii)

2.5.2 Consultancy for complete Management of Project: (Railway Boards orders on committees recommendations under circular number 85/W1/CT/23GCC, dated 31.01.86) Consultancy contracts may range from advisory service to specialised technical assistance. The services from consultant may be grouped into: 2.5.2.1 2.5.2.2 2.5.2.3 2.5.2.4 Pre-investment studies; Preparation service; Implementation service; and Traffic assistance and council service.

These services are: i) Specialized works and structures involving use of computers in modern advanced theories and design and use of latest mechanized construction methods; ii) Important and prestigious buildings and structures industrial units etcetera including framed structures and multi-storeyed buildings; iii) Special type of roof structures and coverings (e.g. for large concurrence or industrial units), basements and similar constructions involving water proofing subways, underpasses, insulation of buildings against heat and sound etcetera. iv) Design and construction of the structures involving advanced and complicated technology e.g. a) Long span pre-stressed concrete bridges, b) Continuous girder bridges, c) Cable stayed bridges, d) Long span arch bridges, e) Shells and folded plate construction, f) Earthquake resistant structures. v) Important projects involving foundation problems, or where geological formation has an important bearing in formulation and execution of the scheme. vi) Auditoriums that involve satisfactory acoustics, requiring specialised advice. vii) Design of location and distribution system for proper modern and sophisticated lighting in Industrial units, Offices and Yards. viii) Architectural and aesthetic features in design of important and prestigious buildings and landscaping around new buildings, station terminals industrial units and railway colonies etcetera. 17 Pramod P. Goel

Tenders, contracts and arbitration ix) x) Mechanisation and modernisation of aeration techniques for overhead equipment. Planning and design of power supply system, current collection arrangements, ventilation and air-conditioning of Metro-Construction projects. Industrial Engineering and layout of manufacturing and repair shops for electrical equipments. Establishment of narrow band long haul microwave links/ communication links of very high reliability suitable for data transmission. Establishment of modern signalling systems and telecommunication links on line where thirstier controlled/chopper controlled traction/ breaking is to be used, Centralized Air-Conditioning of large buildings.

xi) xii)

xiii)

Accordingly Project Management Consultancy (PMC) can be for management of the complete project from preparation to award and commissioning. Once the PMC is awarded for complete project management, the Consultant shall start his work with acquainting itself with the organisation, its practices, policies and system of working, review them and propose project management strategy with reference to: A) Role of PMC, when work is awarded to an agency for execution: Deciding if the work shall be executed by the agency with material on turnkey basis or material shall be issued by the organisation. The consultant shall be instrumental in assisting the organisation to a fruitful & conclusive decision: i) In case of turn key projects it is very difficult to ensure that only high quality material is used and even despite of having been laid such norms, very close and effective supervision is required to ensure that the material used by the contractor or the sub contractor is of high quality or of the quality as specified in the agreement. In case of material being supplied by the railways, safeguard against proper and judicious use of the material has to be ensured. Other hassles such as theft, fire or damage also may cause heavy losses to the railways even when insurance has been taken by the contractor. The best remedy again is close supervision in this case too. The planning & award of the work for execution shall be covered in following steps. Under this part of consultancy, the role of consultant is analysing and advising, broadly limited to table work except with survey, supervision and guidance: a) Working out the signalling scheme, b) Working out job content, c) All associated plans and diagrams, d) Specification for work, e) List of material required, f) Specifications for each item of material, 18

ii)

iii)

g) h) i) j) k) l) m) n) o) p) q) r) s)

List of long lead items, Tender conditions, Preparation of Bill of Quantity (BOQ), Working out cost of work, List of contractors who shall be able to execute the work, List of subcontractors, Time schedule for execution of the work, Total budget for completion of the work, Funds available for the current year, Evaluation of offers for technical and financial suitability, Negotiations for technical and financial matters, Preparation of time schedule, Award of the contract.

2.5.3 The quality, time and cost management: is activity of post award of contract as all of these three elements have to be managed only when the work is in progress. 2.5.3.1 Management of quality: The quality of the project is in its workmanship and quality of the material used. For both, specifications are already drawn but it becomes most important to ensure that both elements of quality are sincerely taken care of. For quality of execution, the Project Management (PM) Consultant deploys trained and experienced personnel to closely supervise the execution progressively. The stages of importance are set such as, for Signalling work, trench for cable laying, cable laying, foundations, prefabricated structures, signals, apparatus cases, cable termination, internal wiring & its testing or any other activity of importance. For managing quality of material: the representative of PM Consultant shall make random checks for the martial used for correctness of its specifications, supplier and overall quality. Report: The consultant shall submit its report of such observations for each such inspection/ supervision/visit and follow-up compliance. Management of time: Usually the time over run is the one of the major elements which has its side effect in terms of cost overrun. Some times the time overrun may result in total redundancy of the work executed. The PM Consultant uses time management techniques to monitor the progress, such as Programme Evaluation and Review Technique (PERT), Bar chart, or computer aided techniques. It shall keep a close watch on long lead items, analyse the basic cause of the slippage and bring to the notice of Project Manager, of the remedial measures in time. Indecision on the part of Project Managers in matters of policy decision and interdepartmental coordination also often results in abnormal delays, and has to be pointed out by the PM Consultant. Management of Cost: The cost overrun may occur due to time overrun or deviation from the scope of work. The PM Consultant shall keep a 19 Pramod P. Goel

i)

ii)

iii) 2.5.3.2

i)

ii)

2.5.3.3

Tenders, contracts and arbitration close watch on payments released by the organisation with reference to physical progress of the work. It shall prepare notes periodically and keep the organisation informed of the financial progress. Advice for documentation: During execution of the work the PM Consultant, depending upon agreement, shall extend timely advice to the organisation or prepare: Application to Commissioner of Railway Safety (CRS), Testing of system before commissioning, Planning of switching over of new system, Preparation for commissioning of work, such as issue of caution order during non-interlock, temporary working instructions, Goomties and communication in those Goomties, additional Assistant Station Masters during non interlock period, Non interlocking the station, Commissioning of the work, Measures for monitoring all above. Testifying measurement books filled up by railway authorities, before releasing payments to the contractor executing the work. Advantages of engaging consultant: A consultant is an independent agency as such is not influenced by internal or external forces, as such is free to offer and get implemented its correct advice. The project management consultant is loyal to the organisation seeking its assistance. It is bound to deliver results which in turn shall be conducive in achieving timely completion of the project with quality of work and material. New techniques for better performance of the project such as concept of Q1, a management technique, may also come from the Consultant, which may prove to be breakthrough in creating new vistas.

2.5.3.4

i) ii) iii) iv)

v) vi) vii) viii) 2.5.3.5 i)

ii) iii)

iv)

2.6 Type of tenders Based on system of contracting: With the introduction of execution of works by way of contractual system, entire affair is always seen with suspicion; however, it still becomes extremely important to get the work executed with good quality, economically and honestly. For such a purpose the whole process has to be democratic- as first principle. Persons handling the affair should be able to take decisions in the best interest of organisation to which they are representing failing which severe damage to the work done is likely to occur- the second principle. The process shall be transparent- the third principle. The bid: The bidder is required to furnish his credentials, the documents to prove that he has been doing the work of nature similar to what is required to be done in the impending work, along with his rates and an financial instrument as earnest money to hold his offer in good stead till all the tenders are evaluated. The work shall be awarded to the lowest and valid bidder after evaluation of all the bids. 20

The lowest bid is the offer by one of the bidders out of all those who offer to execute the work at given rates, to carryout the work at the cost lowest amongst all the bidders. The valid bidder is the person/firm/company/consortium who qualifies the criteria of being valid bidder as given in the tender documents by the railways. While the lowest bidder shall be only one in all probability, the valid bidders may be many or all. If lowest offered cost of work is same for more than one bidder, the action shall be taken to select the bidder/bidders to carryout the work. Accordingly railways, has been continually evaluating existing systems of contracting and modifying them on feedbacks. Based on such experiences the systems of contracting are: 2.6.1 Single packet system of tendering: The financial as well as credential bids are put in one and the same packet. At the time of evaluation of the bids it may so happen that the lowest bidder may not turnout to be valid bidder. Many a times it becomes subjective and very difficult to establish invalidity of the lowest bidder putting the tender evaluating team, precisely the Tender Committee in serious dilemma. With a view to evaluate the tenderers technically without being influenced by the financial bid, the two packet system was introduced with a view for fulfilment a few more conditions. 2.6.2 Two packet system of tendering: Railway Board as per their circular number 94/CE-I/CT/4, dated, 11.6.2003 modified earlier clause on two packet system to read as GMs may call the tenders based on two packet system wherever they feel necessary. However, for the works tenders having value of more than `8 crore, they may, as far as feasible, call the tender on two packet system. These powers may be delegated by GMs, if considered necessary. Railway Board as per their circular number 94/CE-I/CT/4, dated, 07.03.2008 have further reiterated adoption of the two packet system for large value works instead of resorting to single packet high value open tenders. It further has been mentioned that the railway may also resort to prequalification tender to avoid delays in verification of credentials of contractors. Accordingly this system of tendering is being adopted for execution of technical works with an advantage of elimination of invalid bids before opening of the price bid. Under two packet system the bidder has to put his credentials and earnest money instrument in one packet and mark it as packet one. He shall put his rates in second packet and mark the packet as packet two. He shall put both the packets in one envelope/packet and submit his bid. 21 Pramod P. Goel

Tenders, contracts and arbitration The first packet is opened first and is evaluated for the bidder to be valid. Such valid bidders are listed out and the second packet of only those bidders is opened who have been listed out as valid bidders, after announcing the date of opening to the valid bidders. The price bid of remaining unsuccessful bidders is never opened. Under this system the controversy of lowest valid bidder is eliminated. However, if on the basis of information of the first packet, the Tender Committee needs clarification regarding designs and specifications, discussions may be held with each individual party after obtaining approval of the Competent Authority (Railway Boards letter No.85/W1/CT/23-GCC, dated 31.1.86). Price bid of the tender, which is in the power of acceptance of Railway Board, is opened and tender committee recommendations drawn at the zonal railway level are within the powers of the General Manager of the railway concerned to act upon, even if the cost of work is beyond the powers of acceptance of the General Manager. In this case the General Manager shall put his personal comments on the recommendations of the tender committee of credential as well as financial aspects of the case. (Railway Boards circular number 90/CE-I/CT/27, dated: 17.8.95). This procedure shall not be applicable to the tenders related to projects covered by World Bank loan. 2.6.3 Limited tender: As and when a situation arise where the work is of special nature or in an arduous area or under urgency or one and all and it becomes imminent to call the bidders without loss of time, limited tenders are invited out of the list of approved contractors only, which in turn saves time for evaluation of credentials. 2.6.3.1 List of Approved contractors-preparation of: Head of Department (HOD) shall decide the category or categories of works for which approved list is to be prepared. Contractors who want to get them registered on such list/lists shall furnish their credentials and financial capability on invitation of such enlistment, by a railway or organisation at different levels. The list of those tenderers, who fulfil the announced eligibility criteria for enlistment, is finalised and kept updated with inclusions and deletions based on fresh call for enlistment or deletion of faulting contractors respectively. The lists are for different financial and technical capability categories. 2.6.3.2 Financial groups of categories: A) Contractors shall be placed on the class D1, B1, C1 & A1 with monetary limits classified tabulated as 2.6.3.2(A): i) ii) iii) iv) Class D1: up to `01 crore. Class C1: More than `01crore and up to `03 crore. Class B1: More than `03 crore and up to `05 crore. Class A1: More than `05 crore and up to `08 crore.

Table 2.6.3.2(A) Financial group of categories for list of approved tenderers 22

B)

Committee for Examining the Applications: The applications received in response to open advertisement/Internet Notice will be screened by a Committee of 3 officers which will be formed in the same manner as the Tender Committee to deal with the tender of that value and its recommendations will be accepted by the same authority who is competent to accept the tender of that value of the category. At least 6 contractors would be registered in each category. For registration of contractors for work of supply of Ballast & Boulders, a suitable clause in eligibility criteria may be inserted by the Railway in regard to Plant & Machineries and Licensing of Land/Quarry etcetera. Similar Works in eligibility criteria shall be defined unambiguously while notifying the tender notice. C) Registration Charges: All the tenderers applying for enlistment will have to pay non-refundable registration charges in A/c Payee Demand Draft in favour of FA&CAO/ FA&CAO (Con.) or cash to be remitted in the cash office of the Railway for different categories tabulated as 2.6.3.2(C): Category D1 C1 Registration Amount `15,000/`20,000/Category B1 A1 Registration Amount `25,000 `30,000

Table 2.6.3.2(C) Registration category versus registration amount The contractors desirous of registration shall be required to submit the application in the proforma prescribed by the Railways for each category of work in each slab. Registration charges shall be paid for each category separately. 2.6.3.3 Eligibility criteria category-wise: Railway Board as per their circular number No.94/CE-I/CT/4, dated: 11.6.2003 have prescribed eligibility criteria tabulated as 2.6.3.3.
Class D1 Value Up to `1 crore Eligibility Criteria (i) They should have an Engineering Organisation with at least a (one) Graduate Engineer having 10 years experience plus an Engineering Diploma Holder having 5 years experience in relevant discipline and maintain a minimum complement of transport equipments and construction tools and plants commensurate with the nature of works being done by them. (ii) At the time of enlistment, they should have satisfactorily executed at least two similar works each individually costing not less than `25 lakh. (iii) Should have received at least `75 lakh as the contract payment during the last 3 financial years and in the current financial year. (i) They should have an Engineering Organisation with at least a (one) Graduate Engineer having 10 years experience plus two Engineering

C1

More than

23

Pramod P. Goel

Tenders, contracts and arbitration

`1 crore and up to `3 crore Diploma Holders each having 5 years experience in relevant discipline and maintain a minimum complement of transport equipments and construction tools and plants commensurate with the nature of works being done by them. (ii) At the time of enlistment, they should have satisfactorily executed at least two similar works each individually costing not less than `75 lakh. (iii) Should have received at least `3 crore as the contract payment during the last 3 financial years and in the current financial year. (i) They should have an Engineering Organisation with at least two Graduate Engineers each having 10 years experience plus two Engineering Diploma Holders each having 5 years experience in relevant discipline and maintain a minimum complement of transport equipments and construction tools and plants commensurate with the nature of works being done by them. (ii) At the time of enlistment, they should have satisfactorily executed at least two similar works each individually costing not less than `1.25 crore. (iii) Should have received at least `6 crores as the contract payment during the last 3 financial years and in the current financial year. (i) They should have an Engineering Organisation with at least two Graduate Engineers each having 10 years experience plus four Engineering Diploma Holders each having 5 years experience in relevant discipline and maintain a minimum complement of transport equipments and construction tools and plants commensurate with the nature of works being done by them. (ii) At the time of enlistment, they should have satisfactorily executed at least two similar works each individually costing not less than `2 crore. (iii) Should have received at least `10 crores as the contract payment during the last 3 financial years and in the current financial year.

B1

More than `3 crore and up to `5 crore

A1

More than `5 crore and up to `8 crore

Table 2.6.3.3

Criteria for Eligibility of Limited tender aspirants

2.6.3.4 Standing Earnest Money Deposit: The practice of allowing standing EMD has since been deleted (Railway Boards circular number 2003/CEI/CT/4/PT.I dated 30.05.2006). 2.6.3.5 Powers for calling of limited tenders: (Railway Board circular number 2007/CE.I/CT/18 dated 28.9.2007) The officer authorised to approve calling of Limited Tenders vis--vis monetary slab is tabulated as 2.6.3.5: SN i) ii) iii) Monetary slab Up to `25 lakh. More than `25 lakh and up to `01 crore More than `01 crore and up to `05 crore Lowest authority JAG & SG SAG/DRM PHOD/CHOD

Table 2.6.3.5

Lowest authority who can approve for calling the Limited tenders

These powers are subject to sealing of `5 crore. 24

In respect of tenders of value more than `5 crore and up to `8 crore, General Manager would have the discretion to call limited tenders or open tenders for reasons to be recorded in writing. 2.6.3.6 Procedure for formation of approved list of contractors: Approved list of contractors shall be prepared for categories, i) earth work in formation and cutting including construction of minor bridges, ii) major bridges/Road over Bridges (ROBs)/Road Under Bridges (RUBs) and iii) supply of ballast and boulders. Applications will be invited from the eligible contractors/firms through open advertisement in the newspapers and on websites of the Railway on the Internet/ Railnet giving wide publicity. Applications can be submitted by the firms satisfying the eligibility criteria for different categories of the contractors. To have better and larger number of firms participating in the tenders, any tenderer registered for higher value of works will be automatically considered eligible for participating in the tenders for lower value of works. The documents required to be submitted by firms to evaluate credentials for eligibility of the firms shall be: a) b) c) d) e) f) List of works completed by the firm in last 5 years. List of ongoing works awarded to the contractor but not completed. Last Audit Report from registered Chartered Accountant. List of tools and plants. List of vehicles, heavy earth compactors, dumpers etc. List of technical staff working for the firm.

It is pertinent to note here that i) the powers of committee for registration of limited tenderers, ii) granting approval for calling of limited tenders and iii) and calling of limited tenders are different. 2.6.3.7 i) Maintenance of the approved list of contractors: The approved list shall be valid for three years, to be reviewed every year for deletion to be effective from 1st July and additions if any will be done once in six months and which will be effective from 1st January and 1st July. Once the contractor is born on the approved list, it will be valid for three years, unless already deleted during annual review or on expiry of validity of the approved list as a whole, which ever is earlier. There will be separate such lists for open line and construction organisations for each category of the work.

ii)

iii)

25

Pramod P. Goel

Tenders, contracts and arbitration iv) In Open line approved list for class B1,C1, and D1 will be maintained at divisional level and the class A1 shall be common for railway as a whole. Approved list for construction organisation for class B1,C1, and D1 will be for a particular pre-determined geographical area or the zone covered under the jurisdiction of the DYCE(Con) and for class A1 it will be for the zone of CAO(C)/GM(C).

v)

The notice is issued to all those tenderers placed on the list to submit their offers within a very short time usually limited to 4-5 days. Such notice shall be published in railway office as well as shall also be placed on internet. It shall be the responsibility of the tenderers to keep a track of tender notice. The offers are evaluated for lowest bidders only as only valid tenderers are put on the list. Since competition is limited between few minimum tenderers placed on the list, the offered cost is likely to be higher then as compared to the system of open tenders while at the same time morally elevated tenderers do good job in short time compensating for cost due to time overrun. The list so prepared is required to consist of a minimum of the tenderers, as specified, to be eligible for use. Such system of tendering is not encouraged, but is resorted to under extreme contingency, to avoid public outcry. 2.6.4 Special limited tender: Special Limited Tendering system is adopted, in consultation with the FA&CAO, in one of the situations as given hereafter, however in partial modification to letter No.94/CE-I/CT/4 dated 17.10.2002, Railway Board has further decided that CAO (C) with the concurrence of FA&CAO(C) may invite Special Limited Tenders not only for specialized nature of work but for all types of works depending upon the merit of the case. (Railway Boards circular number 2007/CE.I/CT/18 dated 28.9.2007): 2.6.4.1 2.6.4.2 2.6.4.3 Work of specialised nature, under personal approval of PHOD. Work of urgent nature, under personal approval of General Manager. Consultancy work, under personal approval of General Manager.

Under the system of special limited tenders the circumstances similar to the invitation of limited tenders are invited out of the list so available while at the same time some more tenderers which are not born on the list may be added and some may be deleted out of the list for issue of notice to invite their tender. Such a step is required to include a few more tenderers better equipped to perform the given job. Similarly some are deleted who are not considered fit to be included to avoid a situation where they may qualify as lowest bidder but not suitable for the given work. Reasons for non inclusion of the tenderers out of the approved list shall be recorded before submission for concurrence of FA&CAO (Railway 26

Boards circular 94/CE-I/CT/4 DATED 17.9.97). However, preferably more than six tenderers shall be invited subject to minima of four. This system is eventually fraught with the possibility of favouritism as such is not left to single authority but General Manager and the associated finance officer at the highest level in the organisation are required to agree and approve. The remaining process of evaluation shall be same as that in case of limited tender. 2.6.5 Single tender: In cases of accidents or breaches where the railway track is washed off due to rains or major accidents the first handy bidder who shall come to rescue in restoration of the train movement is handpicked and appointed to for the purpose, on given and accepted rates, with the approval of General Manager. Such single tenders may be called limited to the cost of work being `2 crore each only for the purpose of early completion of last mile of throughput enhancement works relating to doubling and traffic facility plan heads. Tender committee in such cases shall be at SAG level with acceptance by CAO/C. These powers shall be exercised by CAO/C personally only under the personal concurrence of FA&CAO/C, (Railway Boards circular number 2007/CE.1/CT/18 dated 07.03.2008). The stringent conditions for appointing contractor on single tender basis are such that it is almost impossible to engage a contractor except under conditions as mentioned above. Railway Board, however, have decided as per their circular number 2007/CE.1/ CT/18 Pt. XII, dated 31.12.2010 that the powers for accepting single tender given to CAOs/C for doubling & traffic facility plan heads be extended to New Lines and Gauge Conversion Projects also for those projects only which are targeted for completion in 2010-11. 2.6.5.1 i) ii) iii) iv) Emergent situations: Emergent situations cover: Accidents and breaches involving dislocation to traffic. Works of specialised nature which has to be personally approved by the General Manager. Annual Maintenance contract for equipments may be placed on authorised dealers with the approval of Additional General Manager. Any other situation where General Manager personally considers is inescapable to call for single tenders subject to: a) These powers can not be delegated to any other authority including to the CAO even if he enjoys all powers of GMs as in case of certain railways. b) Prior concurrence of FA&CAO is obtained. c) No post facto sanction/ratification will be allowed. d) Single Tender should be resorted to only after exhausting the Open Tender/Special Limited Tender routes. 27 Pramod P. Goel

Tenders, contracts and arbitration e) Tight targets and urgency cannot be accepted as a reason for calling Single tenders. In these cases, limited Tenders/Special Limited Tenders should invariably be called for from the approved list and not from non-registered contractors. The decision in regard to these specialised works should be taken by the Chief Administrative Officer/Construction or the General Manager and cannot be delegated further. Routine nature of works like transportation of ballast, Permanent Way material, cement, renovation of canteen complex and renovation of officers chambers should not be undertaken on a Single Tender basis under the garb of urgency. Adherence to stiff target dates, or any shift in target dates of completion of projects like gauge conversion etcetera should not be a cause of awarding works on a Single Tender. Such exigencies can be taken care of by Special Limited Tenders by the Railways. It has been noticed that in many cases of Single Tenders, the delay in completion of contracts has resulted in time overruns as well as incurring of extra expenditure, which completely nullified the calling of Single Tenders on grounds of urgency (Railway Boards circular number 93/WZ/PQR/SC/4/P/ dated 27.9.96). In view of the commitment to the Rajya Sabha (Hindi: ; meaning the "Council of States") Committee on Government Assurances, the number of cases finalised on Single tender in each of the above mentioned three categories, (i), (ii) & (iii) of this paragraph are required to be reported to the Railway Board by the GMs Monthly statements, to ensure a close monitoring of the number of cases of single tender over the various Zonal Railways. It is pertinent to note that in case of Limited Tenders the invitation to tenderer is given to the tenderers placed on approved list, while in case of Special Limited tenders, the invitation is given to few selected tenderers with specialised capabilities which may be from the list of approved tenderers, from out side the list or a mix of both while tenders are handpicked for the specific purpose; The powers and the procedure for each system of tendering being different. 2.6.6 Short notice tender: Some times, under compelling circumstances the time between sale of tender document and the submission of the tender has to be reduced from given statuary one month. Such time may be reduced up to 21 days when considered necessary without finance concurrence by CAO/C. This shall be resorted to only after the bid document, site survey reports, plans etcetera are ready and that such reduction in tender notice does not restrict the level of competition. Further reduction of this tender notice period from 21 days but restricted to minimum 15 days, may be done under rare exceptional circumstances in case of small value works by CAO/C with the concurrence of FA& CAO/C (Railway Boards circular number 2007/CE.I/CT/18 dated 07.03.2008).

28

Short tender notice may also be issued when the lowest offer bidder (L-1) backs out, there should be retendering in a transparent and fair manner. The authority may, in such a situation, call for limited or short notice tender if so justified in the interest of work and take a decision on the basis of lowest tender. However, while deciding on L-1, instructions as contained in paragraph 3.4.1 of Boards letter no. 94/CE.I/CT/4 dated, 17.10.2002, which reads as L-1 should be defined as the lowest, valid, eligible and technically acceptable tenderer who would have been otherwise considered for award of contract directly, if the rates were not reasonably high, should be observed. 2.7 Procurement of material for works contracts: For works contracts other than turnkey, technically sensitive material is issued to the contractor by the railway. Much of the material for technical application is procured through manufacturers placed on the list issued by RDSO after evaluating technical competence and financial capability of the manufacturer desirous to be considered for its placement on the list. Material of general usage is procured either by the contractor or by the railway, from the vendors other than those placed on the list of suppliers issued by RDSO. 2.8 Procurement of proprietary items by railways: Railway procures material based on specifications issued for the same. There are many vendors in the country which literally work as ancillary to railways. RDSO issues lists of such vendors from time to time. Material, accordingly, is procured out of those vendors who are placed on the RDSOs list or other wise, where the required material is not manufactured by vendors who are not essentially required to be placed on the list issued by RDSO, are procured from such vendors. However under situations where the manufacturers not placed on the RDSOs list meet the specifications the material can be procured from the lowest bidder. For the sake of example measuring instruments are not required to be placed on RDSOs list being of general nature, which are manufactured by many vendors who meet the specifications for the material required. It is pertinent to note that quality and the life of a product with same specifications but defined loosely, vary from vendor to vendor including its cost, which may be some times very much high when compared between local vendors and vendors of multinational repute, respectively. However procurement of such material specific to the brand name shall require issuance of a proprietary certificate by the officer in-charge of procurement. A proprietary certificate is issued in favour of procurement of a product manufactured by a specific vendor. Such a certificate should be issued with adequate and convincing justification which is usually not done to avoid future hassles thereby putting railways to an overall loss. Under another set of circumstances such that a broken part of a machine, if required to be replaced, shall require to be procured from the vendor who 29 Pramod P. Goel

Tenders, contracts and arbitration manufactures the given machine, where there shall be no alternative, the proprietary certificate shall essentially be required to be issued for its purchase. 2.9 Dispensation of tender; powers: To reduce paper work, which may not be applicable for works below given amount of `400000.00 and to reduce time process of contracting, the system is converted to calling quotations. Powers to dispense with contractual system and calling quotations are vested with officers is tabulated as 2.9 (Railway Boards circular number 2007/CE-I/CT/18 dated 5.3.2009). SN Rank of officer Financial limit to dispense with Total financial tenders for works contracts and limit to which to accept quotations quotations can be accepted by Without With finance officers within a finance concurrence financial year concurrence 1 Sr. Scale Nil `100000.00* `200000.00 2 J.A. Grade Nil `200000.00 `2000000.00 3 S.A. Grade/ DRM Nil `400000.00 `4000000.00 * Subject to where Sr. Scale officer is independent incharge of project Table 2.9 Monitory powers for dispensation of tenders

2.9.1 Quotation: Dispensation of tender tantamount to dispensation of procedure for entering into works contract and getting the desired work executed through a shorter procedure by inviting bids called as quotations, being within financial limits and observing certain limitations given in preceding paragraph. Normally the power to dispense with calling of tenders should be exercised sparingly. The circumstances under which quotations have to be called should be spelt out. These powers will be exercised by the officers with their own administrative approval and no separate administrative approval is necessary. It is pertinent to note that the exceeding the financial limit to which quotations can be accepted by officers within a financial year, is a serious financial irregularity and as such a meticulous record of expenditure through quotations is required to be maintained by each officer exercising such powers. Such works may be required during specific period and in a special jurisdiction, such as loading/unloading, transporting of material, maintenance works of construction/offices/quarters and such other items which may be required to be done at schedule of rates of railway and include these in the miscellaneous works contracts. While accepting it must be ensured that quotations are: i) Not for items which can be executed through existing work contracts or Zonal contracts. ii) Not for fancy items i.e. of low utility but expensive. 30

iii) iv) v)

Of works which are urgent in nature. Invited from at least three contractors working in that area, at least two of which should be on approved list of the division. From genuine firms (not fictitious).

And also thatA register showing full particulars of the works authorised through quotations will be maintained by the officer having powers to dispense with calling tenders. The register may also be sent to associate finance while seeking their concurrence. *****

31

Pramod P. Goel

Tenders, contracts and arbitration

CHAPTER-III
PROCESS OF TENDERING & ENTERING INTO CONTRACT SECTION I: Works Contracts 3.0 Tendering process: To offer an equal opportunity to all, the process of contracting has to be democratic. The process of contracting is put in parts i) first in-house process before issue of tender notice, ii) issue of tender notice inviting tenders, iii) second in-house process of evaluation of bids and award of contract and iv) post contractual issues, payments and closing of contract dealt in chapter IV of this book. A) FIRST IN-HOUSE PROCESS

3.1 First in-house process before issue of tender notice: For issuance of notice i) the entire work is required to be broken in smaller quantifiable work schedules (job contents) in such a way that sum total of all such job contents combined together completely covers the total work to be executed, ii) the cost of work is to be worked out to be realistic, iii) cost of the tender documents is decided, iv) date of beginning of sale of tender documents and date and time for close of sale of tender documents is decided and v) last date, time, place and manner in which the tender shall be submitted shall be decided. 3.2 Bill Of Quantities (BOQ): As and where signalling system is to be replaced at a given station the activities required shall be i) supply of material by railway as scheduled, ii) making trench, laying cable and terminating, iii) casting of foundation and erection of signal posts with provision of signal unit, iv) supply and erection of central panel, v) wiring interlocking circuits as per wiring diagram, inside relay room, vi) supplying and installing Integrated Power Supply (IPS), vii) transferring the existing system to newly installed signalling system and viii) releasing, transporting and disposal of the unusable released equipment. All these activities are further subdivided into smaller job contents such as making trench and refilling the same after cable laying and laying of cable into the trench may be made as separate activities. Such smaller activities are Work schedules. While making such work schedules, factors taken into consideration are: a) Release of part payments through running bills should be independent for each such activity. b) Payments are made only when the job content of each work schedule have been completed in all respects. c) No part of the work schedule shall be such that in case the work is abandoned by the contractor midway it shall be possible to maintain continuity subsequently, such as, payment of cable laying if included with termination of the cable at its both the ends, cable laying activity 32

shall be completed in itself. Similarly in case of trenching the work schedule shall include refilling the trench after laying of the cable inside, so that cable trench is not left opened. Such work schedules shall be standardised and the cost be worked out by way of rate analysis, so that it shall be possible to use the work schedule repeatedly in all future tenders. The standardised work schedules with corresponding rates worked out makes Schedule of Rates (SOR). The SORs are listed to make a book known with year of standardised rates and the railways which issues the SOR, e.g. SOR 2010, North Central Railway. Each work schedule has elements of labour and material content the ratio of which shall vary with different work schedules. The work schedules with similar ratio of labour and material and to the extent possible, of similar nature, shall be put in one chapter. Each item of SOR shall be associated with the specifications for the material to be used and work to be executed annexed to listed SORs in the book. Any item of the SOR shall not leave any scope of interpretation, other than what is intended, to the specifications provided, to enable the contractor taking advantage to his favour. d) Each such work schedule is provided with unit and quantity to make it bill of quantity (BOQ). e) Each schedule of BOQ multiplied with rate from SOR makes cost of the individual BOQ. f) All such BOQ for a tender added together makes cost of the total work [Table 3.3.1]. g) The railway which has published its own SOR shall issue BOQ for the work while the tenderer shall furnish his rates in percentage above or below or at par to the rates mentioned in SOR. He shall purchase a copy of the SOR from the railway concerned. It is pertinent to note that the schedule content as prepared under SOR and that of BOQ is invariably the same except in case of Non- Schedule items. 3.3 Schedule of Rates (SOR): Each occasion when a new work schedule is required to be added to a tender, its cost is required to be worked out by making rate analysis. In construction organisations and Central Organisation of Railway Electrification (CORE) where execution of work is solely dependent of contracts, and similar type of works are to be executed repetitively the items of all such work schedule, which combined together are sufficient to cover almost all variations to similar works. As such first all such work schedules are identified and rates based on rate analysis of each such work schedule are put grouped as chapters in a book-form. Such book is called as Schedule of Rates (SOR). 33 Pramod P. Goel

Tenders, contracts and arbitration 3.3.1 Rate analysis: A precise work schedule with defined boundaries, specifications for material and specifications for the work to be executed shall be prepared. According to the scope of work the entire work content is divided into units of workable activities i.e. work schedules. The rate of each work schedule are calculated, this process of working out rates of each activity is called Rate Analysis. Rate Analysis has three basic elements, i) working out cost of material: The latest cost of all material scheduled to be provided and used by contractor for the activity is worked out. This shall not include the cost of material scheduled to be supplied by Railway if any, ii) Labour cost: Cost of all labour is worked out; iii) Contractors profit over material and labour cost combined together @ 10% to which overheads and taxes are added: Taxes shall be worked out on material part only while overheads such as supervision etcetera is worked out on material and labour combined to meet with the cost of procurement and transportation. The total of Material and Labour cost, Overheads and contractors profit shall become the cost of each activity independently for one unit of work. Overhead expenses are to take care of the storage, management and sundry expenses. The `Unit Rate of the activity is arrived at by dividing total cost of the work so calculated, by the number of units for which analysis is done. For the sake of example if the total cost as per rate analysis works out to be `200000.00 for 20 signal foundations the unit rate for casting one such signal foundation shall work out to be `10000.00 each. The unit rate becomes SOR of the year in which the same is adopted. Rate analysis of work schedules generated beyond the provisions in the SOR is prepared by a senior subordinate for the Assistant Engineer, of the organisation, and vetted by accounts for correctness of the data and calculations. The rate analysis is then submitted to the Officer concerned at appropriate level, depending upon cost of work, for approval. While preparing rate analysis all references and details shall be given against each item of material and labour for verification in future. A sample rate analysis is tabulated as 3.3.1. Rate analysis for casting of signal foundation in station area. Description of the work: Digging earth, casting signal foundation as per drawing attached along with four numbers foundation bolts, in given ratio of cement, stone chips & sand and plastering 10 mm thick surface with Cement sand ratio 1:3 to fine finish; quenching the foundation for six days minimum, compacting the earth around the signal foundation by ramming, clearing and cleaning the area to its original shape. The foundation bolts shall be perpendicular to the top surface of the foundation and configured to accommodate the signal base freely. The finished surface of the foundation shall be at the level of rail-top finished to perfect horizontal in conformity to the specifications & drawing attached. 34

Quantity= 20 numbers. Specifications: Size of the foundation Cu Mts; Ratio of Cement: Stone chips: Sand = 1:3:6; Size of stone chips = 25mm; Size of the foundation bolts = 25mm diameter x 1 m length 75mm bent and threaded 70mm protruding beyond the surface of the foundation in conformity to drawing number enclosed to the schedule provided with two nuts and one washer with each bolt; The foundation shall not be cast on made-up soil.
SN 1 2. 3. 4 Material Sand coarse Cement Stone chips Foundation Bolts with two nuts and washers Pipe for cable entry Quantity Cum Cum Cum 1 set of 4 bolts Rate in ` .. .. .. .. Cost in ` Rate * qty Rate * qty Rate * qty Rate * qty References Builders book for the month of Builders book for the month of Builders book for the month of Budgetary quotation number.dated. from M/s attached as Annexure-xyz

5 A) a) 1 2 B) C) D)

Taxes Labour & staff: Meson Labour

One ... piece Total cost of material VAT @.....% one four .. ..

Lump Sum . .. Rate * 1 Rate * 4 Rate * 1* 10% . Rates issued by labour commissioner dated Rates issued by labour commissioner dated Rates issued by labour commissioner dated

Supervisor 10%

Total cost of labour One .

Overhead charges @ 15% of A+B+C E) Cost of work = A+B+C+D F) Contactors profit G) Total cost of work A+B+C+D+E+a H) Unit cost of Work Y/20 Approved by

X 10% X*10% X+X*10 %=Y

Y /20 = Z

Vetted by

Prepared by

Table 3.3.1

Typical rate analysis format 35 Pramod P. Goel

Tenders, contracts and arbitration 3.3.2 Preparation of SOR: As and when it is considered that the organisation has to get work done through contracts perpetually, it becomes imperative to prepare Schedule of Rates covering the entire work content into small, workable and independent work schedules, a sum total of which shall cover almost all possible variations of any job content through different permutations and combinations of such schedules. Accordingly all such possible work schedules are prepared and listed out and submitted to the Head of Department (HOD) for approval. As and when approval is accorded by the HOD with or without modifications to the work schedules, the one needed to be modified are done so and specifications for material, procedure and drawings wherever needed are prepared leaving no margin for any ambiguity. A committee consisting of one executive from the department at an appropriate level which may be an officer at Senior Scale or Junior Administrative level and one officer from accounts branch at corresponding appropriate level is appointed in consultation with FA&CAO of the organisation to prepare rate analysis for all such work schedules as finalised along with corresponding specifications and the drawings, with the approval of the HOD. In consideration of the fact that engineering department of Indian Railways has pioneered in preparation of SOR, some times one officer at an appropriate level from engineering department is also deputed to associate with the committee for preparation of SOR as an expert. It is very difficult to identify fraction component of men or material for preparing rate analysis. For example one meson with two labours may cast three signal foundations in a day when the foundations so cast are in near vicinity to each other which may not be possible if the distance between the three is slightly more. In such case if the meson is able to cast 20 foundations in six days the fraction for one foundation shall workout to be 20/6=3.33 which is more realistic due to evenly distribution of overhead expenditure. The quantity so selected therefore should be average realistic. As such it is always better to work out cost of work schedule for realistic average number of items and then workout unit rate. The committee, while working out rate analysis, shall also simultaneously fix unit rates for each such schedule of work. The work schedules may contain elements of material and labour different in different such schedules. Besides the material content of some work schedules may be at large variance as compared to some other such work schedule. Similarly the labour content may also be in wide variance with work schedules varying between qualified engineer to artisan. Under such circumstances the tenderer can not quote rates in percentage, at par, above or below the rates of SOR without disturbing entire rate structure. To avoid this, the work schedules with similar element of material, labour and technical staff, are grouped and put in chapters such that a given percentage in rates for the chapter shall be uniformly applicable to all the work schedules put in one chapter. Accordingly the bidder 36

can offer different rates for different chapters of SOR depending upon prevalent conditions about the specific material, labour or Engineer. Usually need arises for preparation of SOR when a few contracts based on individual work schedules for which rate analysis was done or taken from adjoining organisation or any other source thereby arriving at certain cost of work for the given contract. It is important that the rates for work schedules as prepared for SOR are put on such contracts which have already been awarded, to work out revised cost of the given contract, to test if the cost of contract remains same or within acceptable limits. This simulation shall be a good pointer to look back at individual work schedule for wide variation or mistake in calculation. The matter once sorted out and the committee preparing the SOR is satisfied for its correctness shall sign all the work schedules along with corresponding specifications and the drawings and submit the complete SOR for finance vetting. It may be noted that even though one member of the committee is from accounts, vetting from finance is essentially required to be done for correctness and acceptability of the SOR as a separate exercise. The vetted SOR is submitted to the HOD for approval. The SOR so approved is got printed along with associated specifications and drawings in the form of books named as SOR for XY Railway, 2010, with a price tag. 3.4 Non SOR (NS) items: Howsoever exhaustive SOR may have been prepared to suit requirement for entire work, the possibility of a part of work which is not covered under the given SOR can not be ruled out. In order to cover complete work in question, under such circumstances, one or more work schedule may have to be prepared tailor-made to meet the requirement. These work schedules which are not covered by the SOR are non schedule items. A rate analysis has to be done, on the lines same as that of SOR, to arrive at the present day cost of such non-schedule (NS) items. The rate analysis of each such NS items has to be vetted by associated finance and approved by the accepting authority at the level depending upon the cost of the NS item of work to be included in the contract in question. Railway Board as per their circular number 2007/CE-I/CT/1 dated 31.8.2007 have allowed introduction of new NS items without finance concurrence subject to a maximum ceiling of `05 lakh in a contract or 10% of original value of contract whichever is less. Such NS items of work schedule included in the contract can not be quoted as Last Accepted Rates (LAR) for justifying such work schedule in future tenders. Only rates obtained through competitive tender process can be adopted as LAR.

37

Pramod P. Goel

Tenders, contracts and arbitration Rate of non-SOR items multiplied with the quantity shall make the cost of each such item to be added to the total cost as worked-out out for SOR items. 3.5 Preparation of tender documents: In house exercise which shall be done before floating of tender notice shall be i) working out prevalent cost of the work, ii) cost of tender documents, iii) amount to be deposited as Earnest Money, iv) eligibility criteria and preparation of tender documents. The tender documents shall constitute, i) Schedule for execution of work under the given contract with Bill of Quantities for SOR and non-SOR schedules of work, with specifications for material and for execution, (SOR book to be purchased by bidder separately if one is not already available with him or is not a part of the tender book) along with associated drawings if any, ii) Special Conditions of Contract, iii) General Conditions of Contract for the railway in the zone of which the work is to be executed (to be purchased by bidder separately). 3.5.1 Working out prevalent cost of work: Accuracy of assessment of the present day cost of the work is of utmost importance as this is the only statement which decides the status of rates quoted by different valid bidders, to enable the railway know that the rates so offered are high low or at par and also to what extent. This is the cost of work for putting in notice for invitation of tenders also. Cost of work put in tender notice is vital for the rates received from bidders, being suggestive. In case the cost of work so worked out happens to be higher than the actual cost, if worked out before hand or later, keeping in view the fast rising inflation, to make good any possible omission in working out the cost or for any other reason what so ever it may be and the cost of work received through bids happens to be on higher side, it tantamount to giving a lead to the bidder for quoting high. In such cases the responsibility for loss due to high cost rests with the official who worked out the actual cost. To prevent this to happen, as an abundant precaution, the advertised cost is some times reduced arbitrarily, which makes it very difficult to justify even the real cost received, besides offering clarification for variation between the prevalent and advertised costs. As such it is important to work out the prevalent cost of work carefully before advertising and putting the same in the tender notice. In this connection Railway Boards circular number 2000/W-1/NE/NL/10, Dated 17.10.2001 may also be referred to. Estimation of the present day cost of the work is based on: i) Last accepted rates for the chapters under which the chapters in question are covered. ii) The last accepted rates shall be the latest accepted and for similar area where the work is scheduled to be executed. The rates of area get affected by law and order condition, labour rates of the area, availability 38

iii)

of road and other facilities for execution which also depends on remoteness. Time allotted for execution of work. When the same work, which could be done in one year, earns a given profit, it would be different as compared to if the same work was given to be executed in half the time. However this has serious repercussions as in case higher rates are accepted for reduction of time and ultimately the work takes time larger than given to be completed, the extra money paid shall become the liability of the team awarding the contract. This leads to award of different contracts for similar nature of works, with varying time element, without any consideration for any time schedule and the time element tends almost to become infructuous.

Estimation of the present day cost of the work is done by: i) Last accepted rates (LAR) based on SOR: In the organisation where the SOR is in use, the last accepted rates of work schedules covered under SOR are taken in consideration. If last accepted rates of the same are not available, the last accepted rates may be taken from neighbouring area with other factors in consideration provided the area taken in consideration is similar to where the work is proposed to be undertaken. It is pertinent to note that last accepted rates are those rates of latest accepted contracts on which the contract had been awarded without any riders. Rates of all individual items of work schedule are required to be examined by the tender committee. When the tender is accepted for entering in agreement with the contractor, based upon overall cost of the work being reasonable while rates of some items being higher and for some lower, as compared to last accepted rates, the riders are imposed for such rates to be restricted for not being considered to be taken as last accepted rates for evaluation of future tenders. Last accepted rates based on non-SOR items: When certain item of work schedule is not covered by SOR, there is a possibility that a nonSOR item with exactly same work schedule including same specifications shall be taken as last accepted rates. For considering LAR, the content of the work schedule shall have to be the same for men, material and specifications howsoever insignificant it may appear as slightest change may have financial implications which should be examined by rate analysis. For working out such work schedule which is partially similar to the one for which last accepted rates are available, help may be taken from such accepted rates to arrive at rate of the partially comparable work schedule. Such work schedule shall be considered as non-SOR item and dealt accordingly. 39 Pramod P. Goel

ii)

Tenders, contracts and arbitration iii) New items which did not find place in preceding contracts: In case the work schedule is new, the cost shall be worked out by making a rate analysis. The rate analysis shall establish the cost of the given work schedule as on the date rate analysis is done.

It is pertinent to note that the rates taken for consideration of the tendered cost are absolutely realistic which should be properly examined supported by facts and corresponding documents and put on record for all future considerations. For keeping the rates realistic, the last accepted rates of the work schedule shall be updated by adding element of rise in cost of material or labour, which influence it. 3.5.2 Cost of work: Once the rates and quantities of all work schedules are established the cost of each work schedule shall be obtained by multiplying the quantity by the rate of each such work schedule and the total cost of the work shall be brought by summing up costs of all work schedules, tabulated as 3.5.2.
Schedule I (SOR signalling work schedules) SN SOR Schedule of work No. 1 101 Digging earth, casting signal foundation as per drawing attached along with four numbers foundation bolts, in given ratio of cement, stone chips & sand and plastering 10 mm thick surface with Cement sand ratio 1:3 to fine finish; quenching the foundation for six days minimum, compacting the earth around the signal foundation by ramming, clearing and cleaning the area to its original shape. The foundation bolts shall be perpendicular to the top surface of the foundation and configured to accommodate the signal base freely. The finished surface of the foundation shall be at the level of rail-top finished to perfect horizontal in conformity to the specifications & drawing attached. 2 229 Preparation of foundation for.in conformity to the specifications & drawing attached. 3 230 Supplying and laying of.in conformity to the specifications & drawing attached. 4 313 Supply and installation of in conformity to the specifications & Unit Job Qty. 20 Rate in ` M Cost in ` M*20

Job

M*20

Nos.

O*2

Nos.

P*4

40

drawing attached. Making trench and ..in Mts 100 Z Z*10 conformity to the specifications & 0 drawing attached. Total of cost of work of SOR items ` = SN 1- 85 Schedule II (non-SOR signalling work schedules) Non SOR items of work: NS 1 Transportation of complete Trip 5 m m*5 dismantled material from station yard to railway store depot in conformity to the specifications & drawing attached. NS 2 in conformity to the Job 23 n n*23 specifications & drawing attached. NS 3 in conformity to the Job specifications & drawing attached. 5 721
NS NS 10

.in conformity to the Job specifications & drawing attached. Total of cost of work of Non SOR items `= NS 1-10 Total of cost of complete work (SOR & Non SOR items) ` = (SN 1-85) + (NS 1-10) First digit of the SOR number shall be that of chapter and remaining , that of schedule.

Table 3.5.2 Cost of work under the contract covering SOR & non-SOR item. 3.5.3 Tender documents cost: Cost of tender documents is based on the cost of the work changing from time to time having no relevance to the actual cost of printing. At present the slabs for the cost of tender documents as communicated vide Railway Board circular number 94/CE.I/CT/53 Dated: 18.05.2007, correction slip number 41, is tabulated as 3.5.3. Cost of work in ` Cost of tender documents in ` Up to 5 lakh 1000.00 2000.00 More than `5 lakh up to 20 lakh 3000.00 More than `20 lakh up to 50 lakh 5000.00 More than `50 lakh up to 2 crore 10000.00 More than `02 crore up to 50 crore 25000.00 More than `50 crore 1. For any plan/drawing attached with the tender form (documents) `200 per plan/drawing will be levied extra. 2. If the tender form (documents) is to be sent by registered post, additional postal expenses @ `500.00 per tender form will be charged. Table 3.5.3 Assigning cost of tender documents

41

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Tenders, contracts and arbitration 3.6 Earnest Money Deposit (EMD) & finalisation of the tender in time stipulated in the tender documents: All efforts done shall go haywire if any of the tenderer who submits the bid, becomes lowest valid bidder but does not accept the LOA, when the tender is decided in his favour. To mitigate such a situation the tenderer is required to submit earnest money along with his tender. Any tender received, not attached with the earnest money, is summarily rejected. 3.6.1 Earnest Money Deposit (EMD): It shall be understood that the tender documents have been sold/issued to the tenderer and the tenderer is permitted to tender in consideration of stipulation on his part, that after submitting his tender he will not resile from his offer or modify the terms and conditions thereof in a manner not acceptable to the Engineer. Should the tenderer fail to observe or comply with the said stipulation, the aforesaid amount shall be liable to be forfeited to the railway (Railway Board No. 2003/CE-I/CT/4/PT.I dated 12.05.2006). It is pertinent to note that the Earnest money, as is suggestive by its meaning, is to maintain the bid valid for the period defined in the tender conditions. In case the tenderer desires to withdraw his offer before the expiry of this period of validity of the offer, the earnest money submitted with the tender, may be forfeited and the remaining bids shall be evaluated except when the tenderer withdrawing his bid is not the lowest. In case he happens to be the lowest bidder, re-tendering shall be resorted to [Railway Boards circular number 94/CE.1/CT/4, dated 17.10.2002]. This money is therefore kept such that it hurts the bidder in case of forfeiture. The Earnest Money is specified through Regulation for Tenders and Contracts, clause number 5, Earnest Money and Security Deposit as 2% of estimated tender value for the estimated cost up to `one crore & `two Lakh plus 1 % of the excess of the estimated cost of work beyond `one crore, subject to a maximum of `one crore, as indicated in the Tender Notice (Railway Boards circular number 2007/CE.I/CT/18, dated 28.09.2007). The amount so worked out shall be rounded off to next higher ten rupees if the amount of earnest money is less than `1000.00 and should be rounded off to hundred rupees if the amount is more than `1000.00 (Railway Boards circular number 78/W1/CT/13 (Policy) dated 22.12.78). For example if the amount of earnest money works out to be `311.00 it shall be rounded off to `320.00 and if the amount works out to be `1120.00 it shall be rounded off to `1200.00. 3.6.2 Earnest Money Deposit by PSU: In case of single tenders, in works contracts, PSUs owned by Ministry of Railways like RITES, IRCON, KRCL, CRIS, RAILTEL etcetera are exempted from submission of EMD and Security Deposit, in works contracts however no general exemption for Earnest Money and Security Deposit is to be given to the PSUs (Railway Boards circular number 2001/CE-I/CT/19 dated 09.7.2004).

42

3.6.3 Finalisation award of tender within stipulated time: As and when it is not possible to finalise the tender within the time stipulated in the tender documents, extension of the time is sought for from all the bidders irrespective of whether it has been established for any one ore more bidders to be invalid. A situation may arise that one of the bidders fails or refuses to extend the validity of his offer beyond the stipulated time, and if the tenderer happens to be the lowest valid bidder, entire process of tendering shall have to be redone. In case the lowest valid bid received happens to be higher than the earlier lowest bid, and the tender is finalised at this higher bid, it tantamount to financial loss to the railway the responsibility of which rests with the preceding tender committee. To avoid such a situation to arise the tender should be finalised within the time stipulated in the tender documents without assuming that all the bidders shall extend the validity of their offer without fail. However following precautions may be taken, may calling for extension of validity period become inescapable, as inferred based upon Railway Boards circular number 60/777/RS (G), dated 13th February 60: i) In case of tenders issued by Railway Board or for which Railway Boards approval is required but in respect of which the detailed examination is done by the Railway Administration, Railway Board should be addressed sufficiently in advance. ii) In respect of tenders issued by the Railways, Projects or Production Units, the approval of the authority next above should be obtained by the officer in whose powers, the purchase lies. iii) In certain cases, it may happen that tenderers, when extending the validity of their offers at the request of the railway, qualify the extension by price increase or other stipulation regarding delayed delivery or completion etcetera, such qualified extensions should also be highlighted along with the date of expiry of the offers in all noting on the concerned file, so that action on the file is processed at every stage by all concerned with due regard to the urgency called for. iv) To ensure that every effort is made to place contract within the period of validity offer, the date of expiry of the offer should be indicated prominently at every stage in all noting on the tender file. The last sentence of purchase proposal for instance should always is in (in capital) OFFERS EXPIRE ON ________________ and there should be on immediate priority slip where necessary indication OFFERS EXPIRE ON ________________ when the files have to be sent to other branches such as Finance, Law, Technical Departments etcetera, the date of expiry of the offers should also be brought out or stamped prominently at the end of noting and letters, so that they are not lost sight of. 3.6.4 Adjustment of Earnest Money towards security deposit: As the tender in question is accepted, the Earnest Money so deposited with the bid, is adjusted towards part of the Security Money of the successful bidder while 43 Pramod P. Goel

Tenders, contracts and arbitration the EM of remaining bidders is refunded immediately after finalisation of the contract. 3.6.5 Form in which Earnest money to be deposited: The Earnest Money should be in cash or in any of the following forms: (i) Deposit receipts, pay orders, demand drafts. These forms of earnest money could be either of the State Bank of India or of any of the nationalised banks. No confirmatory advice from the Reserve Bank of India will be necessary, (ii) Deposit receipts executed by the Scheduled Banks (other than the State Bank of India and the Nationalised Banks) approved by the Reserve Bank of India for this purpose. The Railways will not, however, accept deposit receipt without getting in writing the concurrence of the Reserve Bank of India. 3.6.6 Schedule for timely finalisation of the tender: Northern Railway has made out a schedule for finalising and issue of LOA within the validity of the offer which is given here for ready reference. Similar procedure may be followed which shall be helpful in monitoring timely finalisation of the tender (Northern Railway circular number 74-W/24 Pt.VII (policy), dated 21/31.12.87) tabulated as 3.6.6: 1. Preparation of comparative statement and briefing note by executive staff. 2. Vetting of comparative statement & briefing note by associate finance. 3. Finalisation of technical note if any required from Executive Officer. 4. Finalisation of the tenders by the tender committee. 5. Acceptance of recommendation of the tender committee by the competent authority. 6. Issue of Acceptance letter. 10 days from the date of opening of tender 5 days from the receipt of comparative statement & briefing note in accounts section. Within 25 days from the date of opening of tender 20 days from the date of receipt of tender documents by the tender committee. 3 days from the date of receipt of tender committee recommendations by the accepting authority. 2 days from the receipt of tender duly accepted by the competent authority.

Table 3.6.6 Time schedule for finalisation of tender within validity period 3.7 Eligibility criteria: In order to ensure that the contractor who undertakes the work does not desert the employer because of unsound financial statues or is not able to carryout the work due to inadequate experience in the field of work required, it is of utmost importance that the work is awarded to the 44

tenderer having requisite qualification. Railway Board, as per their circular number 94/CE-I/CT/4(pt-II), dated 6.5.2003, have standardised such minimum financial eligibility criteria for open works tenders as given hereafter: 3.7.1 No specific eligibility criterion is prescribed for the works costing `50 lakh or less (Railway boards circular number 2008/CE.1/CT/Con/7 (PCE/ GM dated 15.12.2008 & 2007/CE.I/CT/18 Pt.,XII dated 31.12.2010). However, technical and financial eligibility criteria have been prescribed for the works costing more than `50 lakh, for evaluation and consideration of the tender which are within the zone of award of the contract. 3.7.2 Technical Eligibility Criteria: Technical eligibility criteria for ascertaining experience of the contractor in the given field is prescribed by Railway Board as per their circular number 2007/CE.I/CT/18, dated 28.9.2007 is adjudged by: i) Similar nature of work physically completed within the qualifying period, i.e. the last 3 financial years and current financial year (even though the work might have commenced before the qualifying period) should only be considered in evaluating the eligibility criteria. ii) The total value of similar nature of work completed during the qualifying period and not the payments received within qualifying period alone, should be considered. In case, the final bill of similar nature of work has not been passed and final measurements have not been recorded, the paid amount including statutory deduction is to be considered. If final measurements have been recorded and work has been completed with negative variation, then also the paid amount including statutory deduction is to be considered. However, if final measurements have been recorded and work has been completed with positive variation but variation has not been sanctioned, original agreement value or last sanctioned agreement value which ever is lower should be considered for judging eligibility. In the case of composite works involving combination of different works, even separate completed works of required value should be considered while evaluating the eligibility criteria. For example, in a tender for bridge works where similar nature of work has been defined as bridge works with pile foundation and PSC superstructure, a tenderer, who had completed one bridge work with pile foundation of value at least equal to 35% of tender value and also had completed one bridge work with PSC superstructure of value at least equal to 35% of tender value, should be considered as having fulfilled 45 Pramod P. Goel

iii)

Tenders, contracts and arbitration the eligibility criterion of having completed single similar nature of work. Similar nature of works should be clearly defined by the PHODs on open line and nominated Chief Engineer/CSTE/CEE on construction organization of the Zonal Railways and it should be strictly followed and the same should be indicated in the NIT/Tender document also. In case of any deviation/modification in the list of similar nature of works, prior approval of competent authority should be obtained.

iv)

It is pertinent to note that similar work shall be defined without any ambiguity and beyond any doubt to give no chance to the tenderer for interpreting the meaning in a manner other than intended to by the railways. The eligibility criteria may be modified on case-to-case basis in respect of urgent project/works and specialised nature of work with concurrence of FA&CAO (Associate finance) and personal approval of General Manager. This has further been relaxed to be used by CAO/C which can not be delegated further (Railway Boards letter number 2007/CE.I/CT/18, dated 28.9.2007). However CAO/C, with the personal concurrence of FA&CAO/C may also relax the eligibility criteria as given above, in case of special circumstances (Railway Boards circular number 2007/CE.1/CT/18, dated 14.03.2008). 3.7.3 The documents as listed hereafter shall be specified for submission along with the tender: (a) List of personnel, Organization available on hand and proposed to be engaged for the subject work. (b) List of Plant & Machinery available on hand (own) and proposed to be inducted (own and hired to be given separately) for the subject work. (c) List of works completed in the last three financial years giving description of work, organisation for whom executed, approximate value of contract at the time of award, date of award and date of scheduled completion of work. Date of actual start, actual completion and final value of contract should also be given. (d) List of works on hand indicating description of work, contract value and approximate value of balance work yet to be done and date of award. Note: 1) In case of items (c) and (d) above, supportive documents/ certificates from the Organizations with whom they worked/are working should be enclosed. 2) Certificates from private individuals, for whom such works are executed /being executed, should not be accepted. 46

3.7.4 Financial eligibility criteria: To adjudge financial capability of the intending tenderer, total contract amount received during the last 3 financial years and in the current financial year should be a minimum of 150% of advertised tender value. Tender Committee would satisfy themselves about the authenticity of the certificates produced by the tender(s) to this effect which may be an attested certificate from the employer/client, audited balance sheet duly certified by the Accountant etcetera. The details about the certificate to be accepted in regard to the turnover may, however, be notified along with the minimum eligibility criteria while advertising/issuing the tender notice by the competent authority. While requirement of revenue /Banker Solvency Certificate as one of the minimum eligibility criteria from bank has been stopped forthwith, the Tender Committee shall still examine the overall financial soundness of the tenderers based upon the volume of work handled, turn over, balance sheet etcetera (Railway Boards circular number 2007/CE.I/CT/18 dated 28.9.2007). 3.7.5 Eligibility criteria specific to Joint Venture firms: Railway Board has prescribed Technical, Financial eligibility criteria and papers to be submitted for JV firms as detailed hereafter: 3.7.5.1 Technical eligibility criteria for JV firms: Either the JV firm or any one of the members of the JV firm must have satisfactorily completed in the last three previous financial years and current financial year up to the date of opening of the tender, one similar single work for a minimum of 35% of advertised tender value. In case of composite work i.e. works involving more than one distinct component as Civil Engineering works, S&T works, Electrical works, OHE works etcetera and in case of major bridges, substructure and superstructure etcetera, at least 35% of the value of each such components of similar nature should have been satisfactorily completed by the JV firm or any one of the members of the JV firm in previous three financial years and the current financial year up to the date of opening of the tender. In such cases, what constitutes a component in a composite work shall be clearly defined as part of the tender condition without any ambiguity. Note: Value of a completed work done by a member in an earlier partnership firm shall be reckoned only to the extent the concerned members share in that partnership firm/JV firm for the purpose of satisfying his compliance of the above mentioned technical eligibility criteria in the tender under consideration. 3.7.5.2 Financial eligibility criteria of JV firms: The contractual payment received by the JV firm or the arithmetic sum of contractual payments received by all the members of JV firm in the previous three years and the current financial year up to the date of opening of the tender shall be at least 150% of the estimated cost of the work as mentioned in the tender. 47 Pramod P. Goel

Tenders, contracts and arbitration Note: Contractual payment received by a Member in an earlier JV firm shall be reckoned only to the extent of the concerned members share in that JV firm for the purpose of satisfying compliance of the above mentioned financial eligibility criteria in tender under consideration. 3.7.5.3 Documents to be enclosed by the Joint Venture firm: JV firm shall enclose documents: A) In case one or more members of the JV firm is/are partnership firm(s) document to be submitted shall be: a) Copy of the Partnership deed duly certified by Notary. b) Consent of all the partners to enter into the Joint Venture Agreement on a stamp paper of appropriate value, in original. c) Power of Attorney duly registered as per prevailing law in favour of one of the partners to sign the MOU and JV Agreement on behalf of the partners and create liability against the firm. B) In case one or more members is/are Proprietary Firm or Hindu Undivided Family (HUF), the Affidavit on stamp paper of appropriate value declaring that his Concern is a Proprietary concern and he is sole proprietor of the Concern or he is in position of KARTA of HUF and he has the authority, power and consent given by other partners to act on behalf of HUF, shall be enclosed. C) In case one or more members is/are limited companies, the following documents shall be submitted: a) Copy duly Notarised of resolutions of the Directors of the Company, permitting the company to enter into the JV agreement, authorising Managing Director (MD) or one of the Directors or Managers of the Company to sign the JV agreement, such other documents required to be signed on behalf of the Company and enter into liability against the company and under/or do any other act on behalf of the Company. b) Copy of the Memorandum of Articles of Association of the Company. c) Power of Attorney duly registered as per prevailing law, by the Company authorising the person to do/act mentioned in the paragraph a above. D) All the members of the JV firm shall certify that they have not been blacklisted or debarred by Railways or any other Ministry/Department of the Government of India/State Government from participation in tenders/contract in the past either in their individual capacity or the JV firm or partnership firm in which they were members/partners. 3.8 Schedule for execution of work: A works contract may cover signalling, telecommunication, civil engineering, electrical general or overhead equipment, or any other type of work, while the SOR prepared in one organisation may be available for signalling work, telecommunication work and civil engineering work and may not be available for electrical general work or any other group. At the same time even though the SOR being available for signalling, 48

telecommunication, civil Engineering but certain items of work which are required to be executed in the given contract, may not be available for signalling or civil engineering or any other discipline. In such cases non-SOR items shall have to be created. Sections of SOR and non-SOR items are kept in separate schedules of the tender document. In case the work involves more than one discipline viz. S&T, Civil. Electric and OHE, sections for each discipline of work shall be kept separate keeping SOR and non-SOR items also separate e.g. if primary work is that of signalling then SOR items for Signalling works are kept in Schedule-I, non-SOR Signalling work items shall be in schedule-II, SOR of telecommunication works shall be in schedule-III, non-SOR telecommunication work schedule shall be in section-IV, so on and so forth. This arrangement of segregation of works is to facilitate identification and to maintain natural difference between similar works of different disciplines, such as a foundation for signal post or for an apparatus case shall be different than the foundation for a bridge or OHE mast which requires skill and arrangements different to each other. The sum total of the cost of work under each such schedule shall be the total cost of the work under the contract. Even though, in case of work schedule for supply of material as well as for execution, being SOR based, the tenderer is supposed to quote on percentage basis, the work schedule, along with its quantity should be given in the BOQ to avoid manipulation of quantities between financially lucrative and poor, work schedules. This has a serious vigilance implication also (Railway Boards circular number 76/WI/CT/53 dated 22.04.1977). While a margin of 25% is kept for variation in quantities of schedules of work provided in the contract, addition of new items of work schedules post contractually lead to complications, as such schedule of work shall be exhaustive and shall cover all aspects of the work to be executed leaving behind no scope for any modification or addition to the existing work schedules. There have been instances where work schedules included in the tender document based on assumption were required to be modified when work was undertaken, usually on higher rates causing loss to railways. Railway Board as per their circular number 72/WI/CT/43, dated 21.09.1972, reiterated that contracts for works should not be awarded unless soil tests, site investigation have been completed, all plans, drawings and estimates duly approved/sanctioned by competent authority and that there is no hitch in handing over the site to the contractor. By and large works contract and stores contracts are dealt with by separate organizations, there being a separate directorate of stores. Procurement of stores for many projects in bulk has specific advantage over procurement in retail or 49 Pramod P. Goel

Tenders, contracts and arbitration through contractors that i) it shall invariably be economical and ii) quality shall be better being supplied by a bigger dealer/manufacturer. As such it is considered always better to award works contract with major and technically vulnerable material as railway supply and balance material such as nuts and bolts and other mechanical or electrical items of general nature, as contractors supply. Over the period it has been observed that with the poor coordination between technical and stores organizations the projects used to be delayed many a times abnormally resulting in introducing supply of such important material as the schedule item of work although important material had to be procured from RDSO approved firms with due inspection by RDSO or the purchaser/consignee. This arrangement worked well resulting in award of larger projects for execution on Turn Key basis. 3.9 Turnkey contract and its Schedule for execution and use of material: A turnkey contract is like purchasing a car of given specifications to which the key is turned to drive it home. The contract for execution of work shall be bound with, i) General Conditions of Contract (GCC), ii) Special Conditions of Contract (SCC), iii) Schedule for specifications for work, requirements & procedures, iv) Schedule for specifications of material to be used, and v) time frame to be adhered. To ensure the quality of material and work, execution is supervised through Project Management Consultancy whenever adequate number of officers and staff, for the purpose, is not available with the railway organisations project. Management of turnkey contracts makes it different than retail works contracts in respect to disintegrated BOQ and SOR. The tenderer shall be provided with the work quantified to be executed with its basic details. If planning and designing is also to be included this shall also be mentioned in the tender. However in any case: i) Work has to be detailed and quantified. ii) Cost of the work has to be worked out. iii) Specifications for execution of work have to be specified. iv) Specifications for each material to be used have to be given in tender conditions leaving behind no scope for use of substandard material by the contractor. v) Authority for inspection of material has to be specified. vi) Planning & designing if entrusted to the contractor, condition shall be inserted that the planning and designing part of the work shall be got approved from the railway before undertaking execution. vii) Milestones for payment have to be decided and put as tender conditions in such a way that the cash-flow of the contractor is maintained while at the same time each activity for which payment is done is independent in itself such that in case of midway termination of contract it is possible for the next contractor to continue without payment hassles. viii) Time for completion of the work shall be specified. 50

ix)

Special Conditions of contract have to be framed to suit the specific contract. 3.9.1 Work content has to be detailed and quantified: The scope of the work, to be executed, shall be described and quantified giving detailed specifications for execution and material. For example, if the turnkey work is for installation and making the station ready for commissioning, replacing the existing signalling system by Solid State Interlocking with colour light signals, the names of the stations shall be identified by the railway and the section on which the stations are situated, shall be given with additional work details about power supply, point machines, signals etcetera, leaving no margin for assumption and ambiguity. 3.9.2 Cost of turn key contract work: For the purpose of working out the cost of a turnkey contract the entire work under the contract shall be identified and put in four groups viz. i) work schedules covered under SOR, ii) work schedules covered under available non-SOR items, iii) work schedules to cover the balance part of the work not covered under SOR and non-SOR items combined together and iv) material to be supplied by railways not covered under available SOR and non-SOR items as listed under (i) & (ii) as above. Accordingly BOQ shall be prepared by listing out complete schedule covering SOR, available non-SOR (for which rates are available), new non-SOR and the material for entire work except covered under SOR, available and non-available non-SOR items for the work under turnkey contract. No Schedule of work shall be given to the contractor except the list of specifications for the material to be used under the contract and specifications for execution of work wherever considered significant. i) Cost of work-schedules covered under SOR: As the items as identified under SOR shall cover the work content, material and specifications for both, the last accepted rates for each such item shall be filled on BOQ to get cost of work under this part of the work. The list of material to be supplied by the railway for identified SOR items shall be prepared as list (a). Cost of work-schedules covered under available non-SOR items: As the items as identified under non-SOR shall cover the work content, material and specifications for both, the last accepted rates for each such item shall be filled on BOQ to get cost of work under this part of the work. The list of material to be supplied by the railway for identified non-SOR items shall be prepared as list (b). Cost of work schedules to cover the balance part of the work not covered under SOR and non-SOR items combined together: For all such items which are new and as such their rates are not available, the rate analysis shall be done, which shall cover the work content, material and specifications for both. The rate analysis may preferably include all 51 Pramod P. Goel

ii)

iii)

Tenders, contracts and arbitration material required to be supplied by the contractor for the work schedules covered here. However the rate analysis may also include only that part of material which is in line with SOR items so as to enable this, nonSOR items in future works also. If all material supply is not covered while preparing rate analysis, the list of such material which are left out to be included in the cost shall be prepared as list (c). The rates so analysed shall be got vetted from associated accounts for its correctness before getting them approved by the authority based on the cost of each non-SOR item of work. The rates for the items so analysed, vetted and approved, shall be filled in BOQ to get cost of this part of the work. If planning and designing is to be entrusted with the contractor, a work schedule for the same shall also be prepared, analysed and the cost be added to the BOQ. Material to be supplied by railway not covered under available SOR and non-SOR items as listed: Cost of the material which was to be supplied by the Railways in works contracts other than turn key, listed under (a), (b) & (c) shall be added to the cost arrived at by summing up the cost worked out under BOQ, as discussed under preceding paragraphs.

iv)

The procurement of the material through works contract has financial implications different to when procured through stores contracts. The cost of material so procured through works contract shall include: a) b) c) d) e) f) g) Basic cost of the material with taxes, Cost of staff for handling procurement and reaching to contractors store and then to the site of work, Transportation cost from the place of purchase to contractors store and then to the site of work, Storage accommodation at the contractors premises, Cost of security staff at contractors store and site of work, Insurance of all material from the purchase date and till handing over to railways or as used-up, Overhead office expenditure of the contractor to meet with proportionate cost of managers, staff, accountants, store keepers, security etcetera, usually 15% of the cost of material, Profit over the cost of material.

h)

The cost of the work so calculated shall be got vetted from associated accounts. 3.9.3 Specifications for execution of work: In SOR, the method of execution is provided by-&-large, however since the SOR shall not be used here in turnkey contract, modus operandi can not be left on the choice of the contractor; Rather fine details for execution of the work shall be listed out with specific reference to 52

each activity. For example, if a foundation for the signal post is to be cast, it shall be detailed in tender document such as the foundation shall not be cast on buildup soil, the top level of the foundation shall be in alignment of the top of the adjoining track rail; prescribed the sand cement and gravel ratio, size and shape of foundation, plastering the exposed portion, quenching time, size of the foundation bolts, foundation bolt alignment to match the signal post base etcetera. Wherever required the specifications shall be supported by the associated technical drawings also. The quality of execution shall be clearly defined for reliability, safety and durability of the system installed. Any margin left out while defining specifications, leading to confusion may result in compromise for quality and some times for safety also. 3.9.4 Specifications for each material to be used by the contractor: Material quality is directly related to the performance of the system introduced. i) Quality, ii) reliability, iii) safety and iv) durability of the material is directly proportional to the cost. This phenomenon becomes counter productive in case of turn key contracts since as the standard cost of the material is reduced all the four factors automatically get reduced. Profit margins of the contractor are directly related to the cost of material also. Accordingly, not only the specifications for each material to be used for the work shall be clearly spelt out in the tender documents but inspection and procurement of these shall have to be monitored closely. Holes, such as recycling of rejected material, loosely inspected material etcetera shall be plugged. Deployment of Project Management Consultancy (PMC) agency may prove a better option for tackling such situations. 3.9.5 Authority for inspection of material: One of the three agencies can be deployed for inspection of material viz. RDSO, RITES or consignee. There are certain material which necessarily have to be inspected by RDSO for safety considerations, majority of the mechanical items and other important material are inspected by RITES, remaining few material are inspected by the consignee, under certain compelling circumstances, where consignee is an officer deployed by the organisation getting the work executed. Inspection of material is highly sophisticated technical function and if the person so deployed for inspection is not fully experienced in job of inspection of material may not be able to do justice to the job. Accordingly consignee inspection may be resorted to sparingly. 3.9.6 Planning & designing: Planning and designing is the part of work on which the quality of execution and time taken for completion, depends. Any of the methods for planning and designing, i) done by railways in-house resources, ii) include in the contract, left for the contractor to get it done/prepared from sources available to them, iii) get it done through firms established in taking up this job, & iv) availing services of PMC consultant, may be used. 53 Pramod P. Goel

Tenders, contracts and arbitration i) Planning and designing done by railways in-house resources: Planning and designing section of railways has two major responsibilities, one being preparation of plans ad drawings and second, checking and approving plans and drawings prepared by office subordinate to the organisation. With the depleting man power in railway and simultaneously introduction of higher technology and business of running trains increasing to many fold, approving the plans and drawings, which can not be put on back burner remains the major activity, leaving behind almost no time left for preparation of plans and drawings and compelling the work to be outsourced. The scarcity of staff with the railway has acquired a dimension such that the railway is obliged to get the intermediate tier level work checked (Signalling circuits) through out side agency/firm/company before the final/third tier level checking is carried out by the railway. Include planning and designing in the contract, left for the contractor to get it done/prepared from sources available to them: As an immediate relief, the planning and designing work is put in the contract itself. The contractor is given time for establishing its office and mobilisation of resources, till such time the planning and designing work has to wait delaying the project. Under such situation the plans and diagrams and other important work related important features have to be generated by the contractor through established firms, for approval of the railways before he can take up the work physically. This process is time consuming and the work is likely to be delayed in according approvals and monitoring execution takes its own time (Ghaziabad Kanpur KfW project versus Delhi Metro). Planning and designing done by railways directly through outside resources: Much time is saved in execution of work when designing and drawing is an activity parallel to preparation of tender documents, thereby saving time expediting the project to be undertaken by the contractor who is waiting for receipt of the plans and drawings from railways duly approved available handy immediately as soon an the contract is in place. Plans and drawings when prepared by firms expert in the field shall also be an added advantage of standardisation and its correctness. Planning and designing done availing PMC Consultant services: One of the PMC consultant services is preparation of pre tendering stage works which includes carrying out planning ad designing work also. This arrangement is in line of getting plans and drawings prepared before award of contract. The PMC Consultant may further deploy a planning and designing agency firm to get the work doe in time. 54

ii)

iii)

iv)

3.9.7 Milestones for payment: Timely payments on decided milestones for executed work to the contractor is fundamental to the pace of work. The factors governing fixation of the milestones are therefore very important which involve interest of railways through quality and speedy work as well as that of the contractor through liquid money in his hands enabling him to procure material and deploy labour in time of need. Railways have always been sceptical, while watching its interest about faithful execution of the work. Accordingly a balance has to be created between interest of the contractor as well as that of the railway. The milestones for payments to the contractor are decided based on this balance. The milestones for works contracts in which the work schedules are units for execution of the work, are the work schedules. The payment to the work schedule for making trench is usually associated with back filling of the trench, which can only be done after laying of the cable, as well as a the cable trench by the side of the track cannot be left opened to ensure safety, thus fulfilling the requirement of timely laying of the cable. The cost of laying of cable is associated with its termination on both the ends, for similar reason. Under turnkey works similarly milestones may be set such as making station ready for commissioning as certified by the engineer, making bridge and its testing, laying of track per kilometre, hanging OHE Catenary conductors or such similar completed part of the entire work. 3.9.8 Completion Period: Work is awarded to the contractor essentially with specified completion period vis--vis date of completion. This date of completion is mentioned in the Letter of Acceptance (LAO). 3.10 Conditions of contract: Requirements of the purchaser for getting the work executed and the requirements of the service provider have to be understood and agreed by both the parties. These requirements are the conditions. As and when both the parties agree with each others conditions for the given transaction of business this becomes an agreement and a contract. Refer chapter-V, conditions of contract, of this book for GCC & SCC. 3.10.1 General Conditions of Contract (GCC): Railway being a large organisation certain conditions are prepared and implemented by the Railway Board, for the sake of uniformity, called as General Conditions of Contract (GCC). These GCC are uniformly adopted by each zonal railway for use in execution of contract. These conditions can not be changed or modified by the zonal railways. This is the reason that the GCC is kept bound in the book form which is to be purchased by the tenderer. 3.10.2 Special Conditions of Contract (SCC): The GCC being general in nature covers limited but important policy decisions of railways but do not cover conditions required specific for a given tender. Accordingly conditions specific to the nature of contract are framed by zonal railways, as Special Condition of 55 Pramod P. Goel

Tenders, contracts and arbitration Contract (SCC). These conditions are therefore integral part of the tender documents. 3.11 Artificial Splitting work for floating of tender: A project may be sanctioned involving work covered under different engineering departments such as Engineering, Signal and Telecommunication, Overhead traction equipment, SCADA or any other permutation & combination. Such work of any configuration of engineering or any financial magnitude may be awarded to a Consortium or Joint Venture firm, under the powers of Minister or the Railway Board, under Government of India, which may not always be possible for the reasons that: 3.11.1 Interdepartmental coordination is a complex activity forfeiting the basic purpose of awarding a multi discipline work contract. Accordingly works of such magnitude for single department may be awarded to single agency [Modernisation of signalling system in Ghaziabad- Kanpur section work awarded to Joint Venture for approximately `400 crore, managed at the level of CAO/C (S&T)]. 3.11.2 Availability of such multidimensional agencies being limited, the sanctioned composite work, under one railway say Central Organisation for Railway Electrification, is distributed to Electrical, S&T and Engineering departments. Each such major work is further distributed to contractors specialised in their area of expertise i.e. Electrical works are further distributed to contractors who specialise in OHE, SCADA, Sectioning posts; Signalling, Telecommunication works to contractors specialized individually in signalling and Telecommunication and so on and so forth. Large sanctioned works when allotted to CAO/C, Zonal railway, Divisional or sub-divisional levels for execution are also dealt with in similar way. Under such conditions each organisation has to exercise his powers and prudence based upon level of officer heading the organisation and availability of tenderers suitable to do the given job. Further considerations dictate splitting or uniting the work: 3.11.3 A big contractor provides services of a better qualified and experienced personnel in-turn getting better quality. 3.11.4 Works large enough to get a suitable contractor capable of undertaking it shall be required to be awarded to one big agency. However if the work is time bound due to safety requirements or any other compelling circumstances, it is better to award to more than one agencies. Such a condition may arise in case the work is to be introduced and inaugurated by the dignitary of the level of the President of India, the Prime Minister of India or the Railway Minister, the work is essentially to be allotted to more then one agency to progress concurrently to be completed within given time [Electrification of Danapur - Gaya section under 56

CORE was inaugurated by Honble President of India to be completed by deploying two agencies concurrently for Signalling work]. 3.11.5 It may be observed that there is thin line between splitting and combining of contracts. The fact remains that it is always better to go in for an established and big contractor with rich experience for better quality and standard with uniformity of implementation of the given scheme, at the same time it becomes need of the hour to put contractors more than one at comparatively lower level to meet with the urgency at the cost of non-uniformity. Accordingly splitting of work for tendering is said to be artificial when Manipulated by adding, deleting and splitting, for any reason what so ever, the scope of a work larger in cost against the provisions of Schedule of powers, in order to bring the cost within the powers of accepting authority, for floating the tender. Artificial splitting of works is not appreciated, is viewed with suspicion and is easy to establish. Railway Board, as per their circular number 2004/CEI/Misc/MRs Instructions dated 21.06.2004 have mentioned that in several instances large works are being split up into small value works. It is desirable that this practice is avoided so that experienced and competent contractors normally bid for railway works. However, due care should be taken for areas where it is not possible to find big contractors who can undertake large value works. In such cases it would be desirable to arrive at an optimal mix. 3.12 Works contract tender notice: In order to ensure that the dealing with the tender has to be democratic such that no intending tenderer has a chance to complaint about mode of publicising of the tender. With a view to ensuring better participation and competitions in major tenders, especially those invited under two-packet system, Ministry of Railways have decided that henceforth the tender conditions and the Notice Inviting Tenders should provide adequate clause to ensure participation by Joint Venture (JV)/Partnership firms (Railway Boards circular number 2002/CE-I/CT/37, dated 2.08.2006). 3.12.1 Circulation of the tender notice: Accordingly the tender notice is put in the leading news papers especially those associated with business/commercial world with wide circulation on national level with specific reference to the news paper of the province under which the work is to be executed. The notice shall have judicious mix of local, national and /or financial dailies as well as in Hindi news papers.

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Tenders, contracts and arbitration Tender notices are also sent to the regular working contractors through postal services. The tender notice and tender documents are required to be put on internet also. 3.12.2 Tender notice on Internet: Railway Board, as per their circular number 29/10/5 Dated 29.7.2002 have directed to put the tender notice and the documents on internet with guidelines summarised as: i) The websites must be hosted on secured servers. ii) Only certain nominated persons should be allowed to upload documents to the websites. iii) Document should be uploaded thought File Transfer Protocol (FTP) with appropriate password protection. Also necessary properly worded warning to all the bidders may be put in the beginning of the tender document itself that if any change/addition/deletion with malafide intention is made by the bidder detected at any stage even after award of the contract, all necessary action including banning of business would be taken. In addition, he is also liable to be prosecuted as per the law. Inbuilt safeguarding mechanism in the software itself like hash-totalling may also be provided if found helpful. Efforts may also be made to have signatures of the tendering authority on each page of the tender form which is put on the Internet. Nowadays, software is available which provide such facilities. iv) An on-line form should be provided to potential bidders for filling in, after which the Tender Documents should be downloadable by clicking on a button. v) The documents to be downloaded must contain the following text: At the top of the first page of the document. The end of this document is indicated by an End of Document marker and downloaded from Internet website. At the bottom of the last page of the document End of document vi) The fact that tender documents and tender notices have been put up on the website must be widely publicized. vii) Tenderer should furnish necessary tender fee along with their tender. Tender not accompanied with requisite tender fee is liable to be rejected. The fee can be taken in the form of bank draft etcetera as acceptable to Railway. It is preferable, though not mandatory, to put up documents on the website in PDF format. 58

3.12.3 Inter railway circulation of the Tender notice: The tender notice shall also be: i) Circulated to railways other than the one issuing the notice. ii) Placed on the notice board of the office issuing the tender notice. 3.12.4 Short tender notice: Short tender notice may also be issued under compelling circumstances by CAO/C as well as in cases when lowest bid valid tenderer backs out and retendering is required to be done. 3.12.5 Availability of tender documents before issue of tender notice: It must be ensured that the tender documents are available immediately on publication of the notice unless the date of sale of tender is also specified in the said notice. The time between availability of tender documents and the date of submission of tenders shall not be less than one month however the same may be reduced to 21 days, without finance concurrence but only when considered necessary and does not restrict competition, where considered necessary. This time may further be reduced to 15 days in rare exceptional circumstances, in case of small value works, by CAO/C under concurrence of FA&CAO/C (Railway Boards circular number 2007/CE.I/CT/18 dated 07.03.2008). It is pertinent to note that the sale of tender document to the intending tenderer, who deposits the requisite amount towards cost of tender documents, in case of open tenders, shall not be denied on the pretext that the tenderer does not qualify the eligibility criteria as it is for the tender committee to decide the issue of eligibility,(Railway Boards circular number 2001/V3/N/Misc./Tender, dated 23.6.2001). It is also pertinent to note that once the tender documents are put on sale, issue of corrigendum shall be avoided as chances of any of the purchaser missing the corrigendum can not be ruled out thereby creating serious anomalies in the tenders received. To avoid such a situation, in-house exercise for issue of tender documents shall be done before issue of tender notice. Railway Board has taken a serious view on frequent issue of corrigendum to the tender notice. With the publication of notice, interaction with public at large begins. 3.12.6 Information to be provided in the tender notice: The tender notice shall contain minimum basic information to enable the intending bidder ascertain with available details of the tender about the scope of purchasing the tender documents and participate: i) ii) iii) Name of the work indicating basic work & special features if any; The date & time of start of sale of tender documents and location from where the tender documents may be purchased; Cost of the work; 59 Pramod P. Goel

Tenders, contracts and arbitration iv) v) vi) vii) 3.12.7 Cost of tender papers if purchased from the office directly and when tender papers are asked to be sent through postal cervices; Eligibility criteria; i) financial and ii) technical experience. Earnest Money required to be deposited with the tender documents; Date and time up to which the tenders shall be received and the place, where. A typical Tender Notice: The typical sample tender notice is placed as 3.12.7.

.. RAILWAY TENDER NOTICE Tender Notice No: SG / 224/ II/ PI/.. 1.0 Sealed Tenders are invited for and on behalf of President of India, from reputed contractors having sufficient experience in Panel Interlocking work and financial capability including those registered with railway or any public sector under taking, for the following works. 1.1 Name and Brief Scope of Work: Supply, installation and commissioning of Panel interlocking at , .. & . stations involving trenching & laying of cable, Installation of Signal Post with high power LED Signals, Location Boxes, STM 1 and D/I Mux for communication, provision of Data Loggers, Public Address System and provision of control phone for control communication and Block proving by Axle counters. 2.0 i) Approximate cost of Work: ` 14700000/- (` One Crore forty seven lakh only). ii)Earnest money: ` 270500/-. iii) Completion period: 6 (six) months. i) Date & time of start sale of tender document: Any working day from 01/09/2010 to 03/10/2010, during office working hours (i.e. 10.00 hrs to 18.00 hrs), and on 04/10/2010 up to 11.30 hrs. v) Date & Time of submission of complete tender documents: Any working day from 01/09/2010 to 03/10/2010 during office hours (i.e. 10.00 hrs to 18.00 hrs) and on 04/10/2010 (Mon day) up to 14.00 hrs. vi) Date & Time of opening: 06/12/ 2010 (Monday) at 15.30 hrs. vii) Place of submission of complete tender documents: CSTE Office / (Office of one DY. CSTE at one place and station) & DY. CSTE. Office/(Office of other DY. CSTE at another place or station) viii) Validity of offer and earnest money should be at least 180 days from the date of opening of tender. NOTE: Tenders shall be received and opened on the next day at the same timings in case office remains closed on scheduled opening date due to any reason. 2.1 Non transferable tender documents may be purchased from the office DY Chief Signal & Telecom. Engineer, Railway, . by the tenderer fulfilling the eligibility conditions, on payment of non refundable amount of `5000/- (` Five thousand only). The amount may be deposited in cash with Chief Cashier/.. / .. or through A/c Payee Demand Draft drawn on any Nationalised Bank in favour of FA & CAO, Railway, .(Place) and payable at (City) quoting the details of the above tender. 2.2 Tender documents are also available at website at www.indianrail.gov.in & Tenderer can download the tender form on above website. The cost of tender form `5000/- (Five thousand only) shall be deposited along with the tender document through account payee demand draft on any nationalized bank in f/o FA & CAO/C/.(Place), payable at (City). 3.0 Eligibility criteria & mode of submission of Tenders.

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3.1 Should have completed in the last three financial years (i.e. current year and three previous financial years) at least one similar single work, for a minimum value of 35% of Advertised Tender Value of Work. Similar works shall cover commissioning of at least one work of Panel Interlocking or Solid State Interlocking as well as commissioning of at least one work of Indian railway communication system. 3.2 Total contract amount received during the last three years as per payment certificate should be a minimum of 150 % of Advertised Tender Value of Work. 3.3 Should have minimum construction machinery tools and plants and vehicles etcetera required for satisfactory execution of works. Details to be submitted along with the bid. 3.4 The Tenderer must submit Earnest money with the offer without which the tender shall summarily be rejected: i) The required Earnest money should be deposited in the form of Demand Draft issued by any Nationalized bank in favour of FA&CAO/Con payable at .. ii) No Bank Guarantee Bond will be accepted as Earnest Money. 4.0 Non -receipt or delayed receipts of Tenders due to any account shall be at Tenderers risk. 5.0 Incomplete offer, conditional bid/bids and tenders received after due date & time due to delay of any reason shall be summarily rejected. DY. Chief Signal & Telecom. Engineer(Con) . Railway,

3.12.7 Typical Tender Notice 3.13 Prequalification of tenders: For works of large value, magnitude, calling for special expertise and works requiring special tools and equipment typical for the work of complex nature, only reliable and resourceful contractor shall be chosen. Such works may be that of Civil Engineering, Electrification or Signal & Telecommunication. 3.13.1 Civil Engineering works: Involving, i) Earthwork involving mechanical compaction likely to be costing `50 lakh or more; soil stabilisation which may cover piling, vibration floatation, chemical treatment or such other works or heavy and deep rock cutting requiring heavy plant and machinery irrespective of cost, ii) Tunnelling where contract value is likely to increase beyond `50 lakh, iii) Cut and cover construction where cost of contract is likely to be beyond `50 lakh, iv) Bridge works involving pile formation of large diameter, caissons or deep well foundations for important bridges, cable stayed bridges, continuous girder bridges and fabrication and launching of girders exceeding 60 meter span, v) Building and structural works where cost of work is likely to exceed `50 lakh involving pile foundations, construction of important multi storied buildings including auditoriums requiring superior quality workmanship, shell and folded plate construction and other special architectural features. 3.13.2 Electrification works: Electrification works Involving, i) Design and installation of overhead equipment and ii) Design supply and erection of supervisory remote control equipment.

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Tenders, contracts and arbitration 3.13.3 Signal & Interlocking works: Covering, i) Route Relay Interlocking, ii) Provision of automatic warning system, iii) Provision of centralised traffic control, iv) Mechanized hump yards with provision of retarders, v) Provision of Electronic Interlocking and microwave installations. Other miscellaneous works covering- construction of diaphragm walls, water and sewerage treatment wells costing over `50 lakh, heavy sheet piling works, other major construction works involving large mobilisation of plant and machinery. Invitation of prequalification bids for a specific case shall be decided by the Head of Department concerned with concurrence of associated finance. 3.14 Invitation of prequalification bids: Prequalification is the process of identification of valid bidder before opening the price bids of qualified tenderers as in case of two packet system. However in case of high value contracts prequalification bids are invited and evaluated before inviting the qualified bidders for offer of their price bids. Prequalification bids shall be invited by advertisement in most open manner possible. Non- refundable fee of `2000.00 shall be charged from the intending bidders. All the tenderers who were prequalified should be invited to bid for the regular contract. Number of shortlisted tenderers on prequalified list shall preferably be five ranging up to ten but under no circumstances it shall be less than three (Railway Boards circular number 85/W1/CT/23-GCC dated 31.1.86). B) SECOND IN-HOUSE PROCESS FIRST STEP

3.0 Second in-house process of receipt & evaluation of bids, first step: Second in-house process, first step, is covered in three parts, i) receipt & evaluation of bids, ii) evaluation of the tenders received by a Tender Committee, drawl of tender committees recommendations, iii) Acceptance or non-acceptance of tender committee recommendations, iv) issue of LOA, v) award of contract and vi) signing of agreement. 3.1 Receipt of tenders: The first activity after notice is receipt of tenders. As the last date for receipt is specified in the tender notice as well as in the tender documents, the receipt of the tenders has to be organised by railways from the date of start of sale of the tenders. Under normal circumstances a sturdy box of adequate size to accommodate tenders to be received, guided by the sale of number of tender documents, shall be kept at a conspicuous place in the office of the organisation where the tenders are to be dealt with. The Tender Box shall have an orifice for insertion of the tender documents into the box, preferably on its top and has to be locked and sealed having ensured that it was empty before sealing, by the clerk sealing the box, in presence of an officer. Details of the information about the tender shall be marked on the Tender Box near the orifice or any other conspicuous place on the surface of the box. There may be situations when the 62

size of the tender documents becomes large so much so that the tenders can not be inserted into the Tender Box and alternatively the tender documents have to be delivered in person to the nominated railway employee. When the tenders are to be submitted in person, it must be ensured that the names of at least two such persons shall be mentioned in the tender documents, to whom the tenders are to be delivered, to avoid inconvenience and delay in submission by the tenderer or his representative. The summary of the guidelines issued by Central Vigilance Commission on the subject issued through their circular number 05-04-1-CTE-8 dated 8.6.2004 circulated by Railway Board as per their number 99/RS(G)/779/2 dated 23.09.2004 is given as: In general, the receipt of tenders should be through tender boxes as suggested in our booklets. However, in case where the tenders are required to be submitted by hand, it may be ensured that the names and designation of at least two officers are mentioned in the bid documents. The information about these officers should also be displayed at the entrance reception of the premises where tenders are to be deposited so as to ensure convenient approach for the bidders. The tenders after receipt should be opened on the stipulated date and time in presence of the intending bidders. As soon as the time for receipt of the tenders lapses the orifice on the box for submission of the tenders is closed and sealed by a clerk deployed for the purpose to be ensured by an officer. Any tenderer who may want to submit his tender into the Tender Box after its orifice has been closed shall not be allowed to do so. Similarly unwieldy tender documents being received in person shall also be stopped from being received immediately on lapse of scheduled time. Such tenders shall be dealt with separately. Receipt of tenders by post: An option is given to the tenderers for submission of the tenders by post also. The tender so received by the receipt despatch clerk shall be marked with date and time and submitted under custody of an officer nominated for the purpose who shall deposit the tenders to the tender opening committee on the date of tender opening. 3.1.1 Transparency in dealing with tenders: The system of contracting for execution of works for railways involving huge amounts incurred, brings in, i) Railway - public interaction and ii) high stakes on the part of intending tenderers. This, in-turn involves reputation of railways. As such it becomes very important for the railways to deal with the entire process from receipt and opening of tenders through evaluation by Tender Committee (TC), acceptance by the accepting authority and issue of Letter of Acceptance (LOA) with utmost care. The entire process is charged with secrecy and suspicion as after the tenders so received are dealt with by a set of staff, senior subordinates, and officers at different levels inside department, associated finance and third member of the TC.

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Tenders, contracts and arbitration Besides any leakage of vital information before issue of LOA may also invite push-pull and create dilemma for the team dealing with the case. Accordingly it is of utmost importance that the entire process is not only carried out in transparent manner, following all rules and procedures meticulously, but also it should look to be being followed. 3.1.2 Typical situations: Process of receipt of tenders may meet some typical situations viz. problem of antisocial elements, tenders received late, Tenders received delayed or, receipt of only one tender or many more such typical situations. 3.1.3 Unscrupulous and antisocial elements: As mentioned in preceding paragraph, the stakes of the tenderers are high, to which many unscrupulous people wanting to en-cash the situation by disturbing the process. They will not allow any other tenderer to put his tender using muscle power. To mitigate such a situation i) e-tendering is being adopted, ii) tender notice and tenders are put on internet, iii) police/ RPF is being deployed to keep such persons away from the scene, iv) a methodology has been adopted whereby tender boxes are kept at more than one place, In case a tender is to be dropped in the Division/Construction Division, the tender box is also kept at Headquarters in Open line/ Construction; however, this needs meticulous planning and monitoring to ensure opening of the tenders at the pre-assigned time simultaneously. The sealed tender boxes are then carried under escort at the location where tender opening is scheduled and v) in the areas which are severely affected by antisocial activities, the tendering process can be centralized and can even be done in the Headquarters of other Zonal Railways where there is no threat perception of antisocial elements or is almost minimal as is being done by National Highway Authority of India (NHAI). 3.1.4 Late tenders: Any tender which is received after sealing of the tender box or in case of being received in person after lapse of scheduled time of closure of receipt but before the time of opening of the tenders shall be termed as Late Tenders. It is a question of maintaining parity between the bidders that the late if accepted shall give a message that time for receipt of tenders stands extended till opening of the tenders. Accordingly for level playing it was decided that late tenders shall also not be considered similar to delayed tenders. However, some times, railway could be put to loss if the late tender happened to be economical for the railways. As such as a compromise appears to have been made through circular number 71/RS(G)/777 dated 19.04.1984 reiterated Railway Boards circular number 83/WI/CT/17 dated 30.07.1984, the operating paragraph of which is reproduced hereafter: late tenders from established/reliable suppliers and conferring a substantial financial advantage is to be considered, notwithstanding the general ban, it will be open to the railways to seek the Boards approval for the consideration of such tenders. Since, this should be a very exceptional situation, such cases should be 64

recommended for consideration of the Board with the personal approval of the GM, duly concurred in by the FA & CAO. The Railways should not enter into any dialogue with the agency submitting a delayed tender without obtaining Boards prior clearance. 3.1.5 Delayed tenders: Any tender which is received after sealing of the tender box or in case of being received in person after lapse of scheduled time of closure of receipt but after the time of opening of the tenders shall be termed as Delayed Tenders. Delayed tenders are not opened for consideration. 3.1.6 Receipt of lone tender: So far as open tenders are invited, receipt of only one tender is dealt with in the same manner as receipt of many more tenders. The lone tender shall be dealt with under normal procedure of open tenders. Such tender shall not be put in the category of Single tenders. 3.2 Opening of tenders: In consideration that the date and time for opening of the tenders is announced along with date and time for submission of the tenders, which is kept after a lapse of some time of submission of tenders on the same date, the tenderers or their authorised representatives are allowed to witness the process of opening. The Sale of tender documents should be stopped 4 hours before opening of tenders (Railway Boards circular number 94/CE-I/CT/4, dated 17.9.97). This is for the reasons that i) no controversy arises due to opening on the same date as delay leads to suspicion, ii) the tenderers or their representatives who have to come to submit their bids are not inconvenienced having been asked to attend opening on another date and iii) they are able to know the rates of other bidders vis--vis their own, thereby their own status, avoiding any future controversy. The tenderers or their representatives shall not be allowed to interfere with the process of opening of the tenders while they shall be allowed to take notes and shall sign their presence on a register maintained for the purpose of record. Tenders are opened by the officer of the department where from the tenders are sold, preferably at least Assistant Engineer/Assistant Stores officer rank from the department and one Section Officer from Finance, at the pre-specified time. All tenders shall be taken to the room where the tenders are scheduled to be opened, with adequate sitting arrangement for the authorities responsible to open the tenders and the tenderers or their representatives who chose to participate. 3.2.1 In case of two packet system, the packets of each tenderer, shall contain i) credential and the ii) price bid envelops sealed independently. The main packets containing credential and the price bids shall be opened one by one, numbered on the face of the packet, encircled and signed by both the officials opening these packets, without observing any sequence for consideration for opening. Credential as well price bid envelops shall also put with the same 65 Pramod P. Goel

Tenders, contracts and arbitration number as that of the main packet, encircled and signed by both the officials opening the tenders. The numbering sequence shall be 1, 2, 3 and so on up to the last. All envelops containing Credential bids shall thereafter be opened one by one and price bids shall be preserved unopened and secured. 3.2.2 Credential bids shall be opened in continuation, without a break, one by one. Each page of the tender document so taken out of the envelope, shall be marked with same number as that of the envelopes, encircled and signed by both the tender opening authorities. Any conditions or matter on the document, any change to which may affect the characteristics of the offer howsoever small or insignificant it may appear, shall be encircled and signed by both the tender opening authorities. The document shall be thoroughly checked for any corrections, alterations, overwriting and use of whitener or any other conditions which may indicate alteration shall be encircled and numbered 1, 2, 3 and so on up to the last correction/alteration/overwriting and signed by both the tender opening authorities. The total of such markings shall be endorsed on the last page of the documents conspicuously. In case of any such omission pointed out by any one, at time later, subsequent to opening of the tenders, the authorities shall refrain from making any change in the documents. The omission in the tender document so pointed out shall be treated as have been tempered. Credential bids are evaluated, by the Tender Committee at appropriate level, for valid bidders. The price bids of the valid tenderers, recommended by the tender committee and accepted by the accepting authority, only are opened. Remaining price bids are destroyed after award of contract. 3.2.3 Opening of price bids: The date, time and place of opening of price bids, is advised to the valid bidders well in advance such that it is conveniently possible for them or their authorised repetitive to attend the opening. The price bids are opened on the date, time and place as advised to the tenderers, in the manner and by the opening authorities same as that of opening of credential bids discussed in preceding paragraph. However in addition, the rates, cost or any other related data, in figures and in words, shall also be encircled in a manner that it is not possible to alter any without being noticed, each such entry, and signed by the tender opening authorities. The tender opening authorities shall, under no circumstances, make any entry such as making an inconspicuous word understandable or filling the rate/cost in words or figures where not mentioned or calculation mistakes if any or any remark other than counting of corrections. 3.2.4 In case of single packet system, the packets of each tenderer are opened one by one, first packet without observing any sequence for consideration for opening, is marked with a number encircled and signed by both the tender 66

opening authorities, on the envelope containing the bid after taking out all the documents inside the envelope. The documents from each envelope so opened shall be dealt with observing same procedure and precautions as given in preceding paragraph, for opening of credential and price bids in case of two packet system, simultaneously and before opening next bidders envelope. Same action shall be taken for all the bids numbered 1, 2, 3 and so on up to the last correction/alteration/overwriting. In single as well as two packet system, one of the authorities shall announce rates of each item of schedule, when price bid is opened in the both single as well as two packet system. The tenderers who participate the opening of the price bid, may, if they so desire, note down the rates of all or any of the bidders, without disturbing the tender opening authorities; No assistance shall be provided by railway to the bidders for the same. 3.3 Comparative statement and Briefing note: Comparative statement is a financial comparative table prepared for all SOR and non-SOR work schedules, as offered by the bidders, juxtaposed to the corresponding items of schedules of LAR. The statement is got vetted by accounts for mathematical correctness of LAR and corresponding rates as quoted by the tenderers, before being put up to the tender committee. The briefing note is a narrative statement prepared by a person technically qualified to do so in the office which could be Head Draftsman or a Sectional Engineer competent enough to understand the implications of the statements submitted by the bidder, prepared to facilitate the tender committee in evaluation of the credentials of the tenderers without any comments from the person preparing the statement. The statement is got vetted by associated finance for checking its correctness. 3.3.1 Under two packet system, the briefing note for credential bid is prepared first. Briefing note shall contain all features related to compliance and violation of eligibility criteria and any special conditions of the contract, to facilitate the tender committee to examine the validity of the tenderer or any other feature which need be taken care of. Once the list of valid bidders is finalised by the tender committee and accepted by the tender accepting authority, the financial bids are opened and comparative statement is prepared. 3.3.2 Under single packet system the comparative statement as well as briefing note shall be prepared simultaneously and submitted to the tender committee duly vetted by accounts. It is pertinent to note that any lapse in preparation of comparative statement or the briefing note that might skip attention of persons preparing both and thereafter by the associated accounts resulting in vitiation of the tender or causing anomaly in award of tender shall bear serious repercussions. 67 Pramod P. Goel

Tenders, contracts and arbitration 3.4 Purchase preference: Purchase preference is procurement of product or service to a public sector enterprise (PSE) against any bidder other than PSE under certain conditions. Purchase preference for products and services of central public sector enterprises (CPSE) has been discontinued with effect from 31.03.2008 under Railway Boards circular number 92/RS(G)/ 363/IPEs, dated 24.1.2008, except for the preferential purchase policies framed for specific sectors separately, by the concerned ministries/ departments within relevant Act of Parliament or otherwise, which do not come within the purview of this decision. C) SECOND IN-HOUSE PROCESS, SECOND STEP

3.0 Second in-house process of evaluation of bids, second step: Second step of second in-house process of evaluation of bids is i) constitution of the tender committee, in case of two packet system, ii) evaluation of credential bid, iii) decision on acceptance of tender committee recommendations of credential bid, iv) drawl of tender committee recommendations on price bid and v) decision of the accepting authority by acceptance or rejecting tender committee recommendations on the price bid. In case of single packet system, i) drawl of tender committee recommendations for valid bidders and out of this the lowest valid financial bidder, and v) decision of the accepting authority by acceptance or rejecting tender committee recommendations. 3.1 Constitution of tender committee: While powers to accept tender committee recommendations are specified by Railway Board (paragraph 3.1of subsection Second In-House Process, Third Step -D of this book), constitution of tender committee is made by each railway depending upon schedule of powers as delegated by the General Manager. Different level officers tender committees are appointed for evaluation of tender, depending upon the range of the cost of the work, decided upon lowest tendered cost. In case of two packet system the tender committee is appointed, to evaluate the credential bid, based on the estimated cost of the work as the lowest offered cost is not known at this stage; In case the lowest bid cost works out to be higher than the limit up to which the committee was empowered to evaluate and submit its recommendations, the tender committee at a level appropriate to evaluate the lowest cost offered shall be appointed to evaluate the bid. However in case of single packet tendering system, since the rates are opened but valid tenderer is not decided, the level of the tender committee officers is decided based upon the lowest bid. In two packet or single packet systems, the recommendations can only be drawn by a tender committee, of the officers at the level, which is competent for the lowest valid bid. Accordingly in two packet system the level of tender committee shall depend upon the lowest bid. 68

In case of single packet system the level of tender committee shall depend upon the lowest valid bid. It may be understood here that if the tender committee was appointed based on the lowest offered bid which turns out to be invalid bidder and the bid offered by the next valid bidder does not fall within the powers of the tender committee, the tender committee shall draw its recommendations accordingly and submit the tender committee recommendations accordingly with the remarks for up- gradation of tender committee. On acceptance of the recommendations by the accepting authority, the complete case shall be passed on the tender committee of the level competent to deal with the cost of the tender. 3.1.1 Constitution of the tender committee for works contract: A tender committee shall constitute two or more gazetted officers one of which shall be from the convener organisation which has called the tenders and other from finance, at an appropriate level, a step lower than the accepting authority. Different organizations hold different rules for formation of the tender committees. In construction organisations where the works are executed by and large on contractual system, standing Tender Committees are earmarked for different organisations, while in the organisations where contracts are dealt with rather rarely, the tender committee is nominated on case-to-case basis. In both the cases the tender committee is appointed on tender to tender basis. Atypical example of constitution of the tender committee is given: 3.1.1.1 For works tenders costing up to 20 lakh, the tender committee shall constitute of two members, one member of which shall essentially be from the accounts department and the other from the concerned convener department. 3.1.1.2 For works tenders above 20 lakh, at least three members shall be required, one member of which shall essentially be from the accounts department, the other from the concerned convener department and the third member from any of the technical department other than that of convener. One or more members may be added to the tender committee for works of highly specialised nature where experience of the trade of special nature not available in the organisation may be needed. 3.1.1.3 For Quotations the, the bid shall be evaluated by senior subordinate and accepted by the executive officer at appropriate level. The Briefing Note prepared by the officer concerned is put-up, along with all the tender documents, to the committee. 3.2 Tender committee recommendations (TCR): Eleven of the best Commandments for the tender committee are: 3.2.1 3.2.2 It must be kept in view that the committee members are dealing with public money and the public at large. It must be kept in mind that ignorance of rules is no excuse as such all the members of the tender committee keep themselves abreast with 69 Pramod P. Goel

Tenders, contracts and arbitration rules, regulations and acts, up-to-date. In case of any doubt, the relevant rules must be referred to before proceeding ahead lest it may turn out to be point of no return. It is the tender committee which is responsible for drawl of recommendations for award/ rejection of the offer, as such, it has to scrutinise the Briefing Note and all documents with specific reference to rates also, carefully to be fully conversant with details of each offer. It is in the interest of tender committee that the recommendations are drawn unanimously, as to reach to the consensus which means that thorough analysis has been done in the interest of organisation. However if a unanimous opinion can not be drawn, a note of descent may be given below the level of other two members having signed the recommendations. All the members hold equal responsibility for the recommendations drawn in general but additionally for the area of expertise by the member concerned. It is better to put the view point in the body of the tender committee recommendations instead of giving a note of descent, as a note of descent does not absolve by declining. The process of drawl of the tender committee recommendations is kept confidential for the reason that the leak of information may lead to hobnobbing. Any leak is taken seriously. It is therefore recommended that the tender committee recommendations are drawn in one go, the case file is not sent back to the office once it has been handed over to the tender committee, till the tender committee recommendations are drawn and submitted to the accepting authority for his decision. It must be kept in mind that any audit inspection report or paragraph generated out of the contract is taken by vigilance organisation also. The tender committee shall never consult or take instructions from the accepting authority under any circumstances. The tender committee is of its own self and shall never send the tender committee recommendations or any part there of to any one or anybody for expert or any other opinion or for any other purpose. The tender committee shall never review its recommendations thus drawn under any circumstances. The tender committee shall record whatever is in its mind with reference to deliberations and never succumb to any pressures of any kind whatsoever.

3.2.3

3.2.4

3.2.5

3.2.6

3.2.7 3.2.8 3.2.9

3.2.10 3.2.11

3.3 Evaluation of the bids: Convener member shall take control of i) all the Tender documents, ii) comparative statements, iii) the statement through which the cost of the tender was prepared as well as statement showing last accepted rates in case any other tender having been accepted in between working out cost of work for tender notice and opening of the tender in question and iv) briefing notes and shall see for himself that the documents have been signed by the person(s) who prepared it and have been vetted by Accounts branch wherever needed, before inviting other members of the tender committee. He then shall fix 70

a date for holding tender committee meeting and accordingly shall advise the member(s) to attend the same on given date, time and venue, in writing. 3.3.1 Evaluation of the bids under two packet system: Under two packet system the tender committee proceedings have to take place for i) evaluation and drawl of recommendations through technical and any other eligibility criteria as mentioned in the tender conditions, for enlisting valid bidders and after the recommendations have been accepted by the accepting authority and valid bidders have been decided, for ii) evaluation of financial bids of valid bidders so recommended by the tender committee and accepted by the accepting authority. 3.3.1.1 Evaluation of credential bid: Evaluation of the credential bid, under two packet system is for listing out valid bidders, based on qualifying i) eligibility criteria on experience, ii) eligibility criteria on financial capability and iii) adherence to the tender conditions by directly accepting those as laid down in the tender documents, SCC & GCC and not offering any condition(s) conflicting to the conditions laid down by the railways. The credential bid of each bidder is evaluated carefully for the eligibility criteria and in case certain conditions are laid down by any of the tenderers, the tenderer shall be invited for negotiations to withdraw/amend the given condition. In case the negotiations fail, the tenderer shall not be placed on the list of valid tenderers. The tender committee recommendations are submitted for acceptance to the accepting authority and bids of only those tenderers are opened who qualify as accepted. 3.3.1.2 Evaluation of price bid: Since the valid bidders are already listed, the L-1 bidder is directly known as seen through the comparative statement of LAR versus price bids. The price bids are evaluated on the same lines as described under evaluation under single packet system in ensuing paragraph, except that the valid bidder is not required to be evaluated in this case. 3.3.2 Evaluation of the bids under single packet system: Under single packet system the tender committee proceedings are in two parts, first evaluation of credentials of each tenderer with reference to the financial, technical and other eligibility criteria as mentioned in the tender conditions, to establish valid bidders. The second part shall be to discuss each item of SOR and non-SOR for rates as offered by the valid bidders. The tender committee is also obliged to examine reasonableness of the rates and record the same in its recommendations, of the bidder for which recommendations for acceptance are proposed for acceptance of the tender accepting authority. 3.3.3 Fixing of Estimated cost of the work: The tender committee shall first check veracity of the Last Accepted Rates (LAR) vis--vis estimated cost of the 71 Pramod P. Goel

Tenders, contracts and arbitration work as published in the Tender Notice. The difference between the estimated cost of the work and the LAR, if any shall be examined and ratified. Having decided the LAR, any major variations in the cost of material or labour after preparation of LAR shall be evaluated and loaded onto the cost of work with reference to the SOR chapter affected by the variation in the cost of material or labour. The tender committee shall fix the cost of work before proceeding ahead treating it sacrosanct which shall not be discussed in future proceedings at all. It is also important to keep in view that the non-scheduled items, the rate of which has been derived through rate analysis, for the purpose of current tender, is already up-to-date and can not be further loaded with any additional cost. The tender committee, under no circumstances shall try to justify the reasonableness of any offered rate of SOR or non-SOR item of schedule as submitted by the tenderer vis--vis LAR or estimated cost of the work while discussing offered rates. 3.3.4 Discussing the offer: The statement containing LAR vis--vis rates offered by each bidder juxtaposed to corresponding item of LAR, vetted by associated finance, shall give fairly good idea of rates offered by each bidder. The Briefing note as prepared by the office duly vetted by associated finance shall give all the vital details such as counter conditions if put by any of the tenderer, any overwriting or other issue considered affecting the nature of the offer or violating any condition of the contract etcetera shall be seen and evaluated by the tender committee. The tender committee shall not enter into any dialogue or correspondence with any of the bidder except calling for any of the missing information in writing only. 3.3.4.1 Evaluation of bidders for validity: The tender committee first shall evaluate and discuss financial as well as experience credentials in context to the eligibility criteria given in the tender documents, of each tenderer concluding with, the bidder being valid or not. 3.3.4.2 Evaluation of individual items of schedule: While examining the rates as offered by each bidder, for each SOR and non-SOR item of schedule, if found to be comparable with reference to corresponding schedule of LAR, shall be recorded as considered reasonable otherwise percentage above or below shall be mentioned with its comments for acceptance/ rejection as well as if accepted under given circumstances, not to be considered as LAR in future tenders. While rates of each item of work schedule are examined to ascertain acceptability of each such item, the inter-se status of the tenderers and the lowest bid tenderer (L-1) is decided based on overall tendered cost by the tenderer(s).

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3.3.4.3 Evaluation of overall cost basis: With all the wide variations, overall cost of the work may be compatible to the LAR/estimated cost of the work thereby recommended by tender committee as considered reasonable. In case over all cost of the work is low enough to be unworkable, the tender committee may use its wisdom to recommend for acceptance or rejection as deemed fit by the tender committee (refer ensuing paragraph unworkable rates). In case the rates of the valid lowest bidder are found to be high enough to be acceptable the bidder shall be invited for negotiations. 3.3.4.4 Reasonableness of rates: Rates as offered by the bidders when compared with the list of rates prepared by the railways for working out estimated cost of the work for the purpose of tender notice as well as for comparing with the rates offered by bidders may be compatible, high or low as compared to the said list. When looked at it on overall basis the net cost of the work may again be compatible, high or low. It may not always be possible that the rates for each item of work schedule be same as that of LAR/the list. Rates lower to the extent of 5-6% may be considered reasonable, however lower rates beyond, may have to be examined thoroughly for being workable. With the trend of increase in cost, rates may be expected to be higher, as such to consider the offered rate as reasonable an increase of 3-5% may be considered within the ambit of reasonableness looking at the rate of inflation and the time allotted for execution of work. When referred to the Price Variation clause, the provision is for consideration of benefit for price variation up to 5% is not admissible. This clause is applicable with different weightages for different type of works. (Refer PV clause under paragraph 5.2.34 of this book). The tender committee is essentially required to certify reasonableness of the rates while drawing recommendations. The rates offered by the lowest valid bidder may not always be compatible to the LAR/estimated cost of the work but still may be reasonable for the reasons, to be laid down, in the tender committee recommendations. However going beyond the fundamental reason for recommending reasonableness of the rates and beating-around-the-bush may become cause of trouble for the tender committee. 3.3.5 Unworkable rates: In case the total cost of the work happens to be considerably low as compared to LAR/estimated cost, it may not be possible for the contractor to complete the work with the amount quoted by him and accepted by Railways. If the rates are low enough to suggest that the work can not be executed by the contractor with the cost as offered by him such cost of the tender shall be defined as unworkable. The tender committee may decide to bypass such bidder an unworkable tender even though it may be the lowest valid tender. 73 Pramod P. Goel

Tenders, contracts and arbitration one of the contracts awarded at the cost of work being lower by 20% as compared to the LAR/estimated cost in Central Organisation for railway Electrification, Allahabad, to which the contractor could not undertake the work and the same work was awarded at his risk and cost (The principle of getting work executed at the risk and cost of the failed tender was in vogue at the given time). Audit took the matter seriously and charged the tender committee of accepting unworkable rates causing financial as well as time loss to the railway. During tripartite meeting with account, executive and the Audit, the executive insisted to define rates 20% below LAR/estimated cost of the work as unworkable or the percentage rates below LAR/estimated cost of the work which could be taken as unworkable otherwise. The audit officer did not agree to define and dropped the objection. Had the contractor been able to execute the work at such low rates, it would have opened a Pandora box for all preceding and future contracts. It is pertinent to note that when the rates are either compatible or exceptionally high or exceptionally low, as compared to the LAR/ estimated cost, it is circumstantial and it is the wisdom of the tender committee to judge the circumstances and record its line of action taken in making the given recommendation in good faith without any favour or fear while recommending acceptance or rejection of exceptionally low or high rates. 3.3.6 Negotiations: Negotiation is bargain across the table for reaching at rates for being acceptable to the railways or for withdrawal of certain conditions that might have been added to the tender conditions against as laid down by but not acceptable to the railways. While evaluating item-wise rates offered by bidders, some rates may be high or some may be low, for certain items, as compared to the rates taken to work out LAR/estimated cost of the work, however in such case the rates as offered by the lowest valid bidder, if considered higher to the extent not being considered reasonable, may be invited for negotiations. The lowest valid bidder is termed as L-1 which is defined as the lowest, valid, eligible and technically acceptable tenderer who would have been otherwise considered for award of contract directly, if the rates were not unreasonably high. Negotiations should be held with L-1 only as defined above (Railway Boards circular number 94/CE-I/CT/4, dated 17-10-2002). In tenders, providing for Purchase Preference in favour of PSUs, if the quoted rates of L-1 are considered high and negotiations are resorted to, such negotiations may be held with the original L-1 as also the lowest PSU whose original offer is not higher by more than 10% of the original L-1. Further, if after such negotiations the revised offer of the PSU is higher by more than 10% of the negotiated offer of the original L-1, offer of PSU may not be considered for award of contract. If it is less than 10% the existing procedure for awarding the contract 74

to the PSU may be followed (Railway Boards circular number 94/CE-I/CT/4, dated 17-10-2002). If negotiations are approved by the Tender accepting authority, the call letter for negotiations should be as per the instructions contained in Boards letter No.61/W-II/CT/24 dated 31.10.65 and all guidelines as contained in Boards letter No.73/W-II/CT/15 dated 15.03.74 and Letter No.84/W-I/CT/28 (P) dated 09.07.85 with the modification that it will apply to L-1 only and not to all tenderers. Extract of Railway Boards circular number 65/WII/CT/24 dated 31st October, 1965 is appended hereafter: Railway Board have had under consideration certain aspects of cases when the rates submitted by the Tenderers are considered higher or conditions stipulated by them are considered unacceptable and it is decided to negotiate with the tenderers. In such cases, there is the possibility that a tenderer may resile from his offer on the plea that the negotiations amount to a counter offer in law, and, therefore, amount to a rejection of the original offer. It has been considered that under the law, the original offer does not ordinarily survive, the moment a counter-offer is made. This matter has been examined in consultation with the Ministry of Law and they have advised that although the legal position stated above is correct, it is possible for a tenderer to revive his original offer after the negotiations fail and in that case the original tender becomes available again for acceptance. Such would be the case if a tenderer before commencement of negotiations intimates that his original offer would be open for acceptance if the negotiations fail. The Ministry of Law have therefore, suggested that when Tenderers are called for negotiations, the tenderer should be addressed as follows: The rates quoted in your tender are considered high. You are, therefore, requested to come for negotiations of rates on ---- (date). It is proposed to discuss with you certain conditions of your tender. You are, therefore, requested to come for negotiations only in case you are prepared to furnish before such date the declaration appended herewith. The kind of procedure and communication to the tenderer mentioned above, cannot, however, be included in the General Conditions of Contracts, as a positive action has to be taken in each individual case. The Ministry of Law has further advised that it must be understood that if the period of validity of the original offer expires before the close of the negotiations, the original offer will not be available for acceptance. The period of validity of the original offer must, therefore, be got extended wherever necessary.

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Tenders, contracts and arbitration A copy of form in which the contractors might submit their offers after negotiations in use on one Railway is enclosed for adoption with suitable changes that may be considered necessary.
FORM OF DECLARATION. From: -------------------------------------------- (Full address) To, The President of India Through the Chief Engineer ____________Railway Sir, Tender for ----------------1. I..............................................................do declare that in the event of failure of the contemplated negotiations relating to Tender No.....................opened on.................... my original tender shall remain open for acceptance on its original terms and conditions. 2. On further discussion with your representative on -------- ---in respond to your letter no. -------- dated ------- I/We am/are not prepared to reduce the rates already quoted in the original tender which remains valid up to -----------. OR I/We am/are reducing my/our rates as shown in the enclosed schedule of items. 3. I/We am/are aware that the instructions to Tenderers, special and general conditions of contract & appendices to the original tender remain valid and binding on me/us. 4. I/We agree to undertake the work or complete the supply and complete in all respects by ---------------. 5. I/We agree to abide by the tender on revised rate quoted by me/us. It is open for acceptance for a period of 60/120 days from date, i.e. up to ---------- & in default of my/ our doing so I/We forfeit the earnest money deposited with the Chief Cashier -----------Railway -------- under receipt no. ------ dated ------ already attached with the original tender/ attached herewith. Eligibility as valid tender shall be deemed to be the consideration for the said for future. Yours faithfully (---------------) Signature of Tenderer(s) Date_____________

DA/ Schedule A,B,C Signatures of witness to the signatures of Tenderer(s) 1.------------2. ------------

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There is every possibility that negotiations fail and both, the railway and the tenderer, are not able to reach to an amicable solution with the result the original offer of the lowest valid bidder hold good for acceptance by the railway. This situation may not serve the purpose and railway shall be compelled to offer rates, for those items of schedule for which negotiations were invited, considered being reasonable. This process of offering the rates by railways is termed as counter offer. 3.3.7 Counter offer: Railway Board, through their circular number 94/CEI/CT/4, dated 17-10-2002 have directed that In cases where the overall value of L-1 is not unreasonably high but the rates(s) for certain item(s) in a schedule or the total value for a schedule happen to be higher than those quoted by other tenderers in the same tender or higher than the last accepted rates, the method of counter offering the lower rates(s) obtained in the same tender or if all these are higher, any other rate(s) considered reasonable by Tender Committee may be adopted while finalising the tender. It is pertinent to note that a situation may arise where while negotiating for reduction of rates considered higher may result in reduction of the overall cost of the work going below the LAR/estimated cost of the work, leading to a situation where the work may become financially unviable to the tenderer compelling him to resile, while at the same time, variation in the quantities of the work schedule(s) with higher rates may change the total cost of the work such that it becomes higher than the L-2 thereby vitiating the contract creating a very serious anomaly. 3.3.8 Offer to be examined for vitiation: Status of the lowest valid bidder is sacrosanct so much so that negotiations can only be held with the L-1 only. This is to ensure that it shall not be possible to convert the status of L-2 to L-1 violating the right of the L-1 for award of the contract to him. Although rates for work schedules are rationally worked out to be realistic and are also publicised through SOR, i) the rates as quoted by the tenderer may be cross subsidised and loaded influenced with the consideration of extracting major part of the money through first activities of the whole work for better cash flow or ii) erroneous working out quantity of the of high value works while preparing Schedule of works, or both. As and when quantity of such works is increased, the total cost of work is also increased crossing the cost of work offered by the L-2 thereby pushing the L-1 to L-2 status vitiating the contract. To avoid such a situation to arise i) the quantities for the work schedules must be filled after proper survey only as well as ii) when the rates of work schedules are found to be higher than stipulated a restriction for increase in quantities shall by recommended to be imposed by the tender committee.

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Tenders, contracts and arbitration 3.3.9 Formation of cartel: Usually competitors are best friends and are found some time making an agreement for sharing of works raising the cost of the work. The principle being you take one work next shall be taken by me. This cartel formation raises the cost of work. D) SECOND IN-HOUSE PROCESS, THIRD STEP

3.0 Acceptance of Tender Committee Recommendations (TCRs): The tender committee recommendations may be under two packet system, single packet system or prequalification bid. Tender Committee Recommendations under two packet system of tendering: i) Recommendations on credential bids enlisting valid bidders and on acceptance of the recommendations, ii) Recommendations on price bid for negotiations if negotiations are proposed and/or, iii) Final recommendations. Tender Committee Recommendations under single packet system of tendering: i) Recommendations for negotiations with the lowest valid bidder if negotiations are proposed, and/or, ii) Final recommendations. Tender Committee Recommendations for prequalification bid: Recommendations for prequalification bids shall be similar to the credential bid under two packet system. The TC recommendations may be unanimous or with a note of descent. Although the practice of giving a note of descent is in-vogue but this also proves that the committee members could not work as a team, forfeiting the entire purpose of forming a tender committee, while at the same time it does not absolve the member giving note of descent from the responsibility shared by him. Having finalised the recommendations, the tender committee shall submit the recommendations to the accepting authority. The tender committee is unique for each tender duly approved by the authority concerned. Accordingly it shall stand dissolved after submission of its recommendations thereafter it shall not review or furnish clarifications. 3.1 Power for acceptance of tender committee recommendations within the zonal railways: The powers for acceptance of the TCR used to be delegated by the GM which varied from railway to railway. In order to ensure uniformity amongst various Zonal Railways with regard to the value of tender acceptance by the various tender accepting authorities, Railway Board as per circular number 78

2007/CE-I/CT/13 dated 03.09.2007, have decided that the Power of acceptance of Works Tenders will be as under: SN 1 2 3 4 Power of acceptance of work tenders Up to `2 crore Above `2 crore and up to `8 crore Above `8 crore and up to `50 crore Above `50 crore and up to `100 crore Accepting Authority SG/JAG SAG HAG GM

However where the department is not headed by a PHOD rank officer in HAG, the power of acceptance of works tender shall be as (under Railway Board modification, as per their circular number 2007/CE-I/CT/13 dated 15.10.2007): a) Tenders of value in the range of `8 crore to `30 crore shall be accepted by CHOD in the rank of SAG and; b) Tenders of value in the range of `30 crore to `50 crore shall be accepted by AGM and where no AGM is posted, such tenders shall also be accepted by GM in addition to those tenders in the value range of `50 crore to `100 crore. Under the same modification, in case of Production Units, Workshops and Divisions, GMs in consultation with the FA&CAO may further delegate powers to various officers duly taking into account the local conditions, work requirement, availability of officers etcetera. However, the upper limit of the value range for tender acceptance prescribed in the Railway Boards said letter shall not be exceeded. 3.2 Decision by Accepting Authority on TCR: The Accepting authority has the final verdict over tender committees recommendations (TCRs). i) In case the recommendations are unanimous, the accepting authority may accept without offering any remarks, ii) in case the recommendations are with a note of descent, the accepting authority may accept the majority version of the recommendations with suitable remarks for over ruling the note of descent, iii) In case the tender committees recommendations are considered for acceptance by the accepting authority against the opinion of finance member of the committee, as the tender accepting authority has to take final decision on the Tender Committees recommendations after considering the viewpoints of all members of the committee including the Finance Member. The accepting authority should invariably record his reasons in writing for not accepting the recommendations of any Member. If the Finance member in the capacity of internal check authority feels that some gross financial impropriety is involved in the award of the work, he can report the matter to FA & CAO and seek his further instructions (Railway Boards circular number 74.AC.III/30/6 dated 11.3.77), iv) the accepting authority may, at his discretion, not accept the unanimous or any other recommendations by recording the reasons for doing so and.

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Tenders, contracts and arbitration Once the TCRs have been accepted by the accepting authority, the accepting authority shall not call back and order the tender committee for review of the tender committee recommendations, under any circumstances and if it be so, the tender committee shall not act on such order. 3.3 Tenders to be accepted by Railway Board members or Minister of Railways: Powers to accept Tender Committee recommendations for the tenders with cost beyond `100 crore are vested with Railway Board and Minister of Railways. In such case the TCRs shall be drawn by committee constituted by Principal Heads of Department (PHODs) or where the Coordinating Head of Department (CHOD) is posted, by the CHOD, in the zonal railway concerned. The TCRs so drawn at zonal railway shall be forwarded to Railway Board through General Manager, to be evaluated by an Appreciation Committee of two members, constituted at Executive Directors (ED) level such that ED of the discipline to which the tender pertains shall coordinate with ED Finance to draw recommendations. These recommendations shall be forwarded to the Additional Member of the discipline to which the tender pertains who shall put his observations and forward it to the Additional Member Finance who shall forward it to the concerned Member Railway Board, with his observations for his acceptance. The recommendations shall be forwarded by the Member concerned with his observations to the Minister of Railways (MR), through Finance Commissioner Railways, for the decision by MR if the powers to accept fall with the Minister. 3.4 Letter of Acceptance (LOA): As and when the tender committee recommendations for award of the contract to the tenderer are accepted by the accepting authority, a Letter of Acceptance shall be issued to the tenderer in two copies. The letter shall contain following information: i) Name of the work under which the tender was floated and accepted. ii) The amount of work for which contract is accepted. iii) Date of completion of the work. iv) Request for signing of agreement within 21 days from the date of issue of the LOA. v) Advise to submit a performance Guarantee within 30 days from the date of issue of Letter of Acceptance. vi) Information that the Security Money as deposited by the tenderer along with tender shall stand adjusted towards Earnest Money Deposit and the balance amount of EMD shall be recovered to be adjusted against the balance amount of EMD. vii) Request to the tenderer for return of one copy of the LOA duly signed and stamped by him accepting the LOA. viii) Letter of Acceptance shall be signed by an authority equivalent to the level of convener member of the tender committee, in his name and designation for and on behalf of President of India. 80

3.4.1 Provisions of Indian Contract Act on conditions for revocation of the offer & its acceptance: In terms of clause 7 of Indian Contract Act [Act ix of 1872], In order to convert a proposal into a promise, the acceptance must 1) be absolute and unqualified, 2) be expressed in Some usual and reasonable manner, unless the proposal prescribes the manner in which it is to be accepted. If the proposal prescribes a manner in which it is to be accepted, and the acceptance is not made in such manner, the proposer may, within a reasonable time after the acceptance is communicated to him, insist that his proposal shall be accepted in the prescribed manner, and not otherwise; but if he fails to do so, he accepts the acceptance Here, the proposer is the tenderer and promise is the agreement. In order that there may be a contract, the acceptance has to be unconditional. If the acceptance by railway is with conditions it is no acceptance at all and it shall be treated as counter offer by the railway. This conditional offer from railway (conditions other than proposed by tenderer and accepted by railway originally) if accepted by the tenderer shall become an agreement. The tenderer is free to reject or accept this offer by the railway with some added conditions. If the tenderer also proposes some new conditions this shall be treated as new offer and it shall be open for the railway to accept it or not It is pertinent to note that Tender conditions, in the tender documents as sold to the intending tenderers, if changed at any stage of time after the date of opening of the tender becomes a new tender and tantamount to discrimination, rendering the tender infructuous as with the given inclusion, reduction or modification to the tender or tender conditions might have caused some of the intending bidders to be eligible for bidding or some of the bidders who had already offered their bid might have been out of consideration zone, because of the change. 3.4.2 Delivery of the LOA: It shall be ensured by railways that the LOA is delivered to the tenderer within the date of validity of the offer. In case of delivery of the LOA is made after the date of validity of the offer, tenderer shall be entitled to withdraw his offer. Revocation of proposal and acceptance: Clause 5 of The Indian Contract Act [Act ix of 1872], Revocation of proposal and acceptance, reads as: A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer but not afterwards. Accordingly if the LOA is issued to the tenderer by post, the tenderer may revoke his offer at any time before or at the moment of issue of the LOA but not later. Similarly the railway may revoke their acceptance at any time before or at the moment when the letter of acceptance reaches the tenderer but not afterwards. 81 Pramod P. Goel

Tenders, contracts and arbitration 3.4.3 Letter of Acceptance (LOA), acceptance by the tenderer: As and when the Letter of Acceptance is issued in two copies, the tenderer shall sign one of the copies of the LOA, so received, and send it back to the LOA issuing authority under normal circumstances. It is pertinent to note that in case of acceptance of the LOA, the time period for execution and completion of the work starts from the date of issue of the LOA. Agreement date is not relevant for determining of completion period. 3.4.4 Security Deposit (SD): While Earnest Money is for maintenance of the validity of the offer, security deposit is kept in reserve by the railways as security against faithful completion of the work under agreement. It is required to be deposited within specified time after acceptance of the tender. In terms of clause 16(1) Security Deposit of GCC: 1) The Earnest Money deposited by the Contractor with his tender will be retained by the Railways as part of security for the due and faithful fulfilment of the contract by the contractor. The balance to make up the security deposit, the rates for which are given in ensuing paragraph, may be deposited by the Contractor in cash or may be recovered by percentage deduction from the Contractors on-account bills. Provided also that in case of defaulting contractor the Railway may retain any amount due for payment to the Contractor on the pending on-account bills so that the amounts so retained may not exceed 10% of the total value of the contract. 2) Unless otherwise specified in the special conditions, if any, the Security Deposit/rate of recovery/mode of recovery shall be as under: (a) Security Deposit for each work should be 5% of the contract value, (b) The rate of recovery should be at the rate of 10% of the bill amount till the full security deposit is recovered, (c) Security Deposits (SD) will be recovered only from the running bills of the contract and no other mode of collecting SD such as SD in the form of instruments like BG, FD etcetera shall be accepted towards Security Deposit. This amount so recovered through running bills may be refunded to the contractor, if he so desires, after physical completion of the work, in lieu of the fixed deposit receipt (FDR)/ irrevocable Bank Guarantee for the equivalent amount (Railway Boards Circular number 2007/CE.1/CT/18, dated 14.03 2008). (d) Irrevocable Bank Guarantee (BG) can also be accepted in case of contract being of the value `50 crore and above (Railway Board Circular number 2007/CE.1/CT/18, dated 14.03 2008). Security Deposit shall be returned to the contractor after the physical completion of the work including maintenance period if provided in the contract, as certified by the Competent Authority. 82

3)

The competent authority shall normally be the person who signed the contract (agreement). If this competent authority is of the rank below Junior Administrative (JA) grade (concerned with work), should issue the certificate, the certificate inter-alia should mention that the work has been completed in all respects and that all contractual obligations have been fulfilled by the contractor and that there are no dues from the contractor to the railways against the contract concerned. Before releasing the SD, an unconditional and unequivocal No Claim certificate, from the contractor concerned shall be obtained. No interest will be payable upon the Earnest Money and Security Deposit or amounts payable to the Contractor under the Contract, but Government Securities deposited in terms of Sub Clause (1) of this clause will be payable with interest accrued thereon. Security Deposit is to be given by the Public Sector Units (PSUs) except for the PSUs owned by Ministry of Railways like RITES, IRCON, KRCL, CRIS, RAILTEL etcetera which are exempted from submission of EMD and Security Deposit in works contracts on single tender basis (for details refer paragraph 3.6.2 of subsection A First In-House Process, of this chapter, Earnest money, of this book).

3.4.5 Performance guarantee: Performance guarantee has been inserted as new provision under GCC, while simultaneously removing the provision of risk and cost contracts. Under this provision now the failing contractor shall loose Security deposit as well as Performance Guarantee. 3.4.5.1 Performance guarantee by Railway owned PSUs under single tender: In terms of Railways Boards circular number 2001/CE-I/CT/19 dated 14.9.2007, i) whenever the railway Public Sector Units (PSUs) owned by the Ministry of Railways are awarded works contracts by Railways on single tender basis and are exempted from the requirement of submitting Performance Guarantee, in the event of failure of the Railway PSU to successfully execute the contract as per terms & conditions laid down in the agreement, a penalty equivalent to 5% of the original value of contract would be levied. ii) if Railway PSUs are awarded contracts through competitive bidding (Open tender, Special Limited Tender etc.), the normal rule regarding submission of Performance Guarantee as applicable to other tenderers should be made applicable to these PSUs also to ensure a level playing field. 3.4.5.2 Procedure for obtaining Performance Guarantee: is outlined as in terms of Railway Boards circular number 2007/CE.I/CT/18 dated 28.09.2007 & 2007/CE.I/CT/18.Pt.XII dated 31.12.2010. Also refer paragraph 4.6.2, failure of contract Rescinding and Risk & Cost/ Performance guarantee, of this book:

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Tenders, contracts and arbitration i) The successful bidder shall submit a Performance Guarantee (PG) in the form of an irrevocable bank guarantee amounting to 5% of the contract value. A Performance Guarantee (PG) shall be submitted by the successful bidder within 30 days from the date of issue of letter of acceptance. Extension of time for submission of PG beyond 30 days and up to 60 days from the date of issue of LAO may be given by the authority who is competent to sign the contract agreement, however a penal interest of 15% per annum shall be charged for the delay beyond 30 days i.e. from 31st day after the date of issue of LOA. In case the contractor fails to submit the requisite PG even after 60 days from the date of issue of LOA, the contract shall be terminated duly forfeiting EMD and other dues if any payable against that contract. The filed contractor shall be debarred from participating for in retender for that work The agreement should normally be signed within 21 days after the issue of LOA and the Performance Guarantee shall also be submitted within this time limit. This guarantee shall be initially valid up to the stipulated date of completion plus 60 days beyond that. In case, the time for completion of work gets extended, the contractor shall get the validity of Performance Guarantee extended to cover such extended time for completion of work plus 60 days. The Performance Guarantee (PG) shall be released after the physical completion of the work based on the Completion Certificate issued by the competent authority stating that the contractor has completed the work in all respects satisfactorily. The security deposit, however, shall be released only after the expiry of the maintenance period and after passing the final bill based on No Claim Certificate. Wherever the contract is rescinded, the security deposit shall be forfeited and the Performance Guarantee shall be encashed and the balance work shall be got done independently without risk and cost of the failed contractor. The failed contractor shall be debarred from participating in the tender for executing the balance work. If the failed contractor is a JV or a partnership firm, then every member/partner of such a firm shall be debarred from participating in the tender for the balance work either in his/her individual capacity or as a partner of any other JV / partnership firm. The Engineer shall not make a claim under the Performance Guarantee except for amounts to which the President of India is entitled under the contract (not withstanding and /or without prejudice to any other provisions in the contract agreement) in the event of: a) Failure by the contractor to extend the validity of the Performance Guarantee as described herein above, in which event the Engineer may claim the full amount of the Performance Guarantee. b) Failure by the contractor to pay President of India any amount due, either as agreed by the contractor or determined under any of the 84

ii)

iii)

iv)

vi)

c)

Clauses/Conditions of the agreement, within 30 days of the service of notice to this effect by Engineer. The contract being determined or rescinded under provision of the GCC the Performance Guarantee shall be forfeited in full and shall be absolutely at the disposal of the President of India.

3.4.6 Incentive Bonus Payment: There always has been criticism about tender conditions being lopsided against contractors as the tender conditions (GCC & SCC) safe-guard the interest of railways by imposition of financial penalties. Accordingly the provision for incentive for early and time bound completion of work had been under consideration for insertion to the GCC. Railway Board, as per their circular number 2007/CE.1/CT/18 dated 07.03.2008 have provided Incentive Bonus Payment clause to be inserted in tender conditions for early and time bound completion of throughput enhancement works primarily those coming under the plan heads Doubling and Traffic Facilities, with following parameters: i) The incentive bonus payable shall not be more than 01% of the initial contract value or revised contract value whichever is less for every one month of early completion ahead of original completion period or revised completion period which ever is less. ii) The maximum incentive payable shall not be more than 6% of the original contract value or revised contract value whichever is less. iii) This incentive scheme shall not apply if extension to the original completion period is given irrespective of on whose account (Railway account or contractors account). iv) Period less than a month shall not be reckoned for incentive bonus calculation. 3.5 Agreement & contract: In terms of Regulations for Tenders and Contracts, execution of contract document, the tenderer whose tender has been accepted shall be required to appear in person in the office of the General manager or the CAO (Con) or the Divisional Railway Manager or the concerned Engineer as the case may be, or if a firm or corporation, duly authorised representative shall so appear and execute the agreement within 21 days after issue of the LOA. Failure to do so shall constitute a breach of the agreement affected by the acceptance of the tender in which case the full value of the earnest money accompanying the tender, which stands converted to Security Deposit with the issue of Letter of Acceptance, shall stand forfeited without prejudice to any rights or remedies. In the event of any tenderer whose tender has been accepted shall refuse to execute the contract documents as herein provided, the Railway may determine that such tenderer has abandoned the contract and thereupon his tender and the acceptance thereupon shall be treated as cancelled and Railway shall be entitled to forfeit the full amount of the Ernest Money and to recover the damages for such default. 85 Pramod P. Goel

Tenders, contracts and arbitration 3.5.1 Signing on agreement: The contractor shall sign the agreement with the railway within 21 days from the date of issue of the LOA on the pro-forma provided in the tender documents as purchased by him. With the signing of the agreement pro-forma, all documents, as described under ensuing paragraph number 3.7 under same subsection under which the current paragraph is, become the integral part of the agreement. Any reference thereafter shall be read in totality with the documents so attached to the agreement signed on the given pro-forma. The contract agreement shall be signed by an officer of the rank who was, or an officer equal to in rank of, the convener member of the tender committee, under his name and designation for and on behalf of President of India. All contractual correspondence thereafter, with the contractor, shall be signed under his name and designation, for and on behalf of President of India. As and when a contractual document, addressed to the contractor, is signed by a representative of the railways, under his name and designation only, he shall hold personal liability towards the document signed, while when the document is signed under his name and designation for and on behalf of President of India the liability shall rest with the railway organisation except for the element of any act of misrepresentation conveyed through the document. A sample format of the agreement as used by Central Organisation Railway Electrification is attached as Annexure-IV, placed amongst the last pages of the book. 3.6 Codal provisions of the Indian contract act 1872: All railways follow the rules and directives issued by Ministry of Railway, Railway Board, for dealing with tenders & contracts which are guided by the Codal provisions of the Indian contract Act 1872. Some pertinent definitions under the Codes of the Act are provided in ensuing paragraphs. 3.6.1 Contract: Indian contract act 1872, clause 10: What agreements are contracts reads as All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object and are not hereby expressly declared to be void. Nothing herein contained shall affect any law in force in India, and not hereby expressly repealed by which any contract is required to be made in writing or in presence of witnesses, or any law relating to the registration of documents. 3.6.2 Consent & Free consent: Indian contract act 1872, clause 13: Consent defined reads as Two or more persons are said to consent when they agree upon the same thing in the same sense. Clause 14, of the Act Free consent reads as Consent is said to be free when it is not caused by: i) Coercion, as defined in section 15, or ii) Undue influence, as defined in section 16, or 86

iii) iv) v)

Fraud, as defined in section 17, or Misrepresentation, as defined in section 18, or Mistake, subject to the provisions of section 20, 21, and 22.

Consent is said to be so caused when it would not have been given but for the existence of such coercion, undue influence, fraud, misrepresentation or mistake. 3.6.3 Parties competent to contract: Indian contract act 1872 clause 11: Who are competent to contract reads as Every person is competent to contract who is of age of majority according to the law to which he is subject and who is of sound mind, and is not disqualified from contracting by any law to which he is subject. i) Age of Majority: The age of majority as defined in India is 18 years. ii) Indian contract act 1872, clause 12: What is sound mind for the purpose of contracting read as A person is said to be of sound mind for the purposes of making a contract if, at the time when he makes it, he is capable of understanding it, and of forming a rational judgement as to its effect upon his interest. A person, who is usually of unsound mind, but occasionally of sound mind, may make a contract when he is of sound mind. A person, who is usually of sound mind, but occasionally of unsound mind, may not make a contract when he is of unsound mind. 3.6.4 Coercion defined: In terms of Indian contract act 1872, clause 15 defines Coercion as Coercion is committing or threatening to commit , any act forbidden by the Indian Penal Code or the unlawful detaining or threatening to detain any property, to the prejudice of any person whatever, with the intention of causing any person to enter into agreement. 3.6.5 Undue influence defined: In terms of Indian contract act 1872, clause 16 defines Undue influence as (1) A contract is said to be induced by undue influence where the relation is subsisting between the parties are such that one of the parties is in a position to dominate the will of other and uses that position to obtain an unfair advantage over the other. (2) In particular and without prejudice to the generality of the foregoing principle, a person is deemed to be in a position to dominate the will of another: i) Where he holds a real or apparent authority over the other, or where he stands in a fiduciary relation to other; or ii) Where he makes a contract with a person whose mental capacity is temporarily or permanently affected by reason of age, illness or mental or bodily distress. 3.6.6 Fraud defined: In terms of Indian contract act 1872, clause 17 defines fraud as: Fraud means and includes any of the following acts committed by a 87 Pramod P. Goel

Tenders, contracts and arbitration party to a contract or with his connivance, or by his agent, with intent to deceive another party thereto or his agent or to induce him to enter into the contract: i) ii) iii) iv) v) The suggestion, as a fact, of that which is not true, by one who does not believe it to be true; The active concealment of a fact by one having knowledge or belief of the fact; A promise made without any intention of performing it; Any other act fitted to deceive; and Any such act or omission as the law specially declares to be fraudulent.

3.6.7 Misrepresentation defined: Misrepresentation means and includes, as per Indian contract act 1872, clause 18: i) The positive assertion, in a manner not warranted by the information of the person making it, of that which is not true, though he believes it to be true; Any breach of duty which, without an intent to deceive gains an advantage to the person committing it, or any one claiming under him, by misleading another to his prejudice of any one claiming under him; Causing, however innocently, a party to an agreement to make a mistake as to the substance of the thing which is the subject of agreement.

ii)

iii)

Accordingly a false statement if given knowing it to be false is a fraud while if the statement is given assuming it to be correct is misrepresentation. 3.6.8 Mistake: Indian contract act 1872, Clause 20: Agreement is void where both parties are under mistake as to matter of fact; where both parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void. However in terms of clause 22 of the Indian contract act 1872, which reads as Contract caused by mistake of one party as to matter of factA contract is not voidable merely because it was caused by one of the parties to being under a mistake as a matter of fact. 3.6.9 Void agreement: An agreement is void if i) any part of a single consideration for one or more objects, or any one or any part of any one of several considerations for a single object , is unlawful, ii) unless (a) it is in writing and registered, (b) or is a promise to do compensate for some thing done, (c) or is a promise to pay a debt barred by limitation law, (Indian contract act 1872, clauses 24 & 25respectively). Accordingly an agreement for unlawful consideration is void. 3.7 Documents forming integral part of the contract: The contract forms following documents as its integral part: 88

i)

ii) iii) iv) v) vi)

Original offer of the tenderer, this shall include all tender documents covering (a) BOQ for SOR as well as non-SOR items, (b) Schedule of Rates, whether purchased by the tenderer or not, (c) specifications for execution of work, (d) specifications for material to be used, (e) all plans and drawing associated with work; Offer along with terms and conditions negotiated if any, as accepted by the purchaser/railway; Letter of acceptance duly signed by the bidder; Agreement duly signed by contractor or his authorised representative and by purchaser/ railway, representative; General Conditions of Contract; Special Conditions of the contract.

3.8 Discharge of tender: There could be a situation where i) either the work is no more required to be executed, or ii) valid lowest bid tender can not be accepted because of higher rates, or iii) because of unacceptable terms and conditions. 3.8.1 Discharge of tender when work is no more required to be executed: It is always mentioned in the tender conditions that railway reserves the right to discharge the tender without assigning any reason. Accordingly discharge of tender does not bear any legal implications. The tender can be discharged when the work is no more required to be executed, and the earnest money shall be returned to all the tenderers after discharge. 3.8.2 When the tender can not be accepted due to higher rates: The basis of evaluation of offered rates is comparison with the estimated cost of the work which may be based on Last Accepted Rates of the same region and similar conditions but do not cover the trend of the market, which is to be visualised by the tender committee. It is pertinent to note that the tender committee shall not justify the rates or shall not be looked as justifying the rates if they are higher than the estimated cost of the work beyond acceptable limits. If certain fundamental cause is there to suggest that the given rates, if not accepted, may still be higher if received in second tender after discharge of the existing one, the same may be put on record and the tender may be recommended for acceptance. However members of the tender committee may be sceptical of the prediction which if does not work out to be as predicted, may be taken as false pretext to justify higher rates. It is also true that in case the tender is discharged and retendered and the received rates from the lowest valid bidder turn out to be higher and are to be accepted under duress of shortage of time or any other reason, the previous tender committee responsible for discharge of the tender, becomes questionable. As such the tilt should invariably be to recommend with the supporting document for acceptance of the tender except when the tender committee is sure of foul play (formation of cartel or any such temporary cause). Discharge of tender because of rates tendered by the lowest valid bidder being high, should invariably be the last resort. 89 Pramod P. Goel

Tenders, contracts and arbitration 3.8.3 When the tender can not be accepted because of unacceptable terms and conditions: Tendering under the democratic system is unique in itself where equal opportunity is to be given to the entire intending bidder. As soon as first tender document is sold to the purchaser, the tender stands frozen in the sense that the cost, scope and conditions of the tender can not be changed thereafter to give level playing field to all intending bidders. If the lowest valid bidder incorporates condition or conditions which influence the basic character of the tender which in turn influence the cost or scope of work in howsoever small magnitude, shall tantamount to giving a favour to the tenderer if such condition or conditions are accepted. A very obvious grievance could be if it was allowed this modification of tender condition or conditions to happen, the work could have been done in much lesser cost. Similarly if the tenderers own conditions which benefit him/them, are accepted it shall tantamount to giving favour to the tenderer specific. This vitiates the entire tendering system and as such should not be allowed to happen. 3.8.4 Repercussions of discharging the tender: Two options are there after discharge of the tender, i) retendering may be required to be resorted to or, ii) the work in question is no more required to be taken up in near future. No action is required to be taken when the work is not required to be carried out in near future, bur when the work is required to be carried out retendering shall have to be resorted to. 3.8.4.1 Retendering is required to be resorted to: Retendering may be required to be resorted to get the work executed. Under any circumstances if retendering is done to find rates offered by lowest bidder to be higher then the discharged tender, the set of officers covering tender committee members and the accepting authority become answerable for the revenue loss to the railway. This is a serious matter from all possible dimensions including vigilance. To avoid such a situation, the scope of work for the tender is some times changed with respect to the discharged tender, with modified cost and scope of the work. This may not hold water and as such discharge of the tender, except under circumstances when the work is no more required to be done in near future, should only be resorted to after exhausting all possible alternatives, as a last resort. High rates should be avoided as reason for discharge as it is easier to accept rates higher as compared to LAR/Estimated cost rather accept rates higher then the discharged tender. 3.9 Dispensation of tender; procedure: As the dispensation of the tender is done to carry out small short term works the procedure to call, evaluate, award and complete the work remains almost similar to the process in case of tenders but on small scale in terms of financial implications and duration of execution.

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3.9.1 Procedure for calling quotations and finalising them for award of work: As and when a work occurs where dispensation of tenders becomes essential, a proposal to dispense with calling of tenders shall be initiated and submitted to the authority competent to call for the quotations. The proposal shall be sent to Accounts at an appropriate level, for concurrence. As and when the finance concurrence is made available, the quotations may be processed to be invited. i) The officer concerned shall send quotation enquiry to the vendors of known technical and financial capabilities to the railways, through a quotation notice describing, a) job content and quantities, b) amount of earnest money to be accompanied with the quotation, c) period of completion of work, under sealed cover, by the given date and time. On receipt of the quotations under sealed cover, shall be opened by an officer of the department which had invited the quotations in association with the representatives from associated finance, following procedure similar to opening of tenders. It is pertinent to note that quotation shall not be accepted after the scheduled time of opening. In case a quotation is received from vendors who were not served with the quotation notice, the same may also be considered after ascertaining their financial and technical capability to carry out the given work. iii) The comparative statement shall be prepared juxtaposed to the estimated cost of work schedule wise and recommendations drawn by the officer concerned competent for the same, and submitted to the accepting authority which is the same as who approved the calling of the quotations. In case the recommendations are accepted for award of the work to the lowest valid tenderer, the letter of Acceptance is issued accordingly advising the lowest valid tenderer to furnish security deposit & performance guarantee, along with signed copy of the LOA, and to sign the agreement. The Performance Guarantee shall be submitted by the successful bidder within 30 days from the date of issue of letter of acceptance. However the Work Order shall be issued in favour of the vendor intimating the vendor that the earnest money deposited by the vendor with his offer has been converted into security money and the balance amount of the security money shall be deducted through his on-account bills. The measurement shall be filled in the Measurement Book. The vendor shall submit his bill for the work measured. The Engineer shall issue a certificate for satisfactory completion of the work and the payment against the bill as submitted by the vendor shall be released. 91 Pramod P. Goel

ii)

iv)

v)

vi) vii) viii)

Tenders, contracts and arbitration ix) The performance guarantee shall be released in favour of the vendor on successful completion of the work as certified by the Engineer.

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CHAPTER-III
PROCESS OF TENDERING & ENTERING INTO CONTRACT SECTION II: Project Management Consultancy Contracts by Railways 3.0 Project Management Consultancy Contracts: Railway Board, have issued details on process of tendering & entering into contract for Project Management Consultancy, along with Model Tender Documents Volume-I and Volume-II, under their circular number 2007/ CE.1/CT/18 dated 05.07.2010. The provisions under Volume-I are fundamentals which cannot be changed while Volume-II contains provisions which are variable and can be modified, to suit local requirements of the tender, by the zonal railways, approved at appropriate administrative and fianc levels as permitted in the given tender documents. 3.1 Guidelines for implementation: The agency engaged for PMC shall be called as Consultant and not as contractor. The general guidelines for dealing with the PMC contracts are: 3.1.1 Limited, trial based PMC: The PMC shall be deployed for only two or three contracts in each zonal railway to start with, and only for throughput enhancement construction projects such as doubling, traffic facility, railway electrification and Signal & telecommunication works, costing less than `100 crore. 3.1.2 PMC to be Contract based: The PMC shall be contract based not project based. High value projects should be composite contracts relating to Civil, Electrical, Over Head Equipment and Signal & Telecommunication etcetera departments for which one PMC should be engaged. However even if the composite tender is not floated the PMC can be for the project as a whole covering multiple works contracts being executed under the said project. 3.1.3 PMC for supervision of work only: PMC shall be engaged only for supervision of works for the time being. 3.1.4 Deployment of specialists: In view that the success of the PMC depends upon quality of man-power deployed by the contractor, it shall be imperative upon contractor to engage and deploy personnel different for different category of work in conformity to the provisions of the contract. 3.1.5 Two-packet system of tendering: Two-packet system shall be adopted for PMC tenders, first packet being technical bid and second being finance bid. 3.1.6 Methods of selection: The PMC tender shall be evaluated based on Quality and Cost Based Selection (QCBS)1 method for works contract costing up to `100 crore and on Combined Quality Cum Cost Based Selection (CQCCBS)1 method for works contracts of more than `100 crore. _______________________________________________________________
1

These terms are new to railways and have been adopted by railway from Manual of Policies and procedure of Employment of Consultants dated 31.8.2006 issued by the Ministry of Finance.

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Tenders, contracts and arbitration 3.1.7 Different Consultants for Pre & Post Contracts: The consultant engaged for planning and design activities of pre tendering for the contract shall not be eligible to participate in the PMC during execution, in the same work. 3.1.8 PMC Consultant to work in the capacity as Engineers representative: The PMC Consultant shall work in the capacity as Engineers representative and the Engineers role shall continue to be with regular Engineer/ Manager(s) of Railway. 3.1.9 Consortium members not entitled to take execution and consultancy in the same project: The PMC consultants or any of their members, if it is a consortium, can not be engaged as the main works contractor for the same project for which they are working as consultants. 3.1.10 Joint Ventures entitled to undertake PMC: For details, refer paragraph 1.11 of this book. 3.1.11 Consultant to be instrumental in measurement and bills for payments to the contractor executing the work: The contractor executing the work shall carryout measurement, hundred percent of which shall be checked by the Consultants supervisor followed by 20% test check, carried out by Assistant Resident Engineer/Resident Engineer of the Consultant. This shall be followed by Representative test Check at not less than ten percent by the nominated engineer of the railway. The Project Engineer deployed by railway shall carryout random check to satisfy himself of correctness of the measurements done. 3.1.12 Recording of hidden items of work to be done in presence of Railway Supervisors: For hidden items, which can not be verified later on even through the latest non-destructive testing methods, such as initial level before taking up earth work, in addition to the procedure for checking the measurements, as given in preceding paragraph, the test checks shall be more comprehensive & stringent and these shall be recorded in presence of Railway Supervisors. 3.1.13 Project Engineer to be deployed by railway: Railway shall deploy an engineer at appropriate level who shall be responsible for handling all issues of the PMC including measurements, billing, quantity verification and progress reports etcetera. 3.1.14 Excess billing: PMC consultant shall indemnify railway against excess billing done by the consultant due to oversight or intentionally. The consultant shall take out and maintain insurance at his own cost against such risks. 3.1.15 Insurance by the Consultant against failures: The consultant shall take out and maintain, at its own cost but on terms and conditions approved by the railway, following insurance policies against and for coverage of risks in accordance with good industry practices, with the name of railway as beneficiary of the insurance proceeds, including but not limited to a) Professional Indemnity Cover by the consultant, to cover risks against negligence , errors and omissions by the personnel of the Consultant and failure of the Consultant to perform services, with a limit to be obtained to be at least ten times the value of the Consultancy contract, b) Fidelity guarantee covers, by the Consultant to cover direct financial loss to the railway due to excess payment to the contractors/ 94

suppliers due to international collusion with contractors/ suppliers resulting in raising/ passing of bills in excess of the works executed at site with the limit of indemnity to be at least five times of the value of the Consultancy contract; The Contactor executing work and the Consultant shall also take independent insurance policies as required by law, in the name of Consultant as beneficiary for, c) Employers liability and workmens compensation, with respect to personnel of Consultant, any such life, health, accident, travel or other insurance as may be appropriate, except third party liabilities for which insurance shall be required, as under law, with minimum coverage of twice the Contract value. The Consultant shall submit copies of such insurance policy certificates, copies of the insurance policies and evidence that the premia has been paid in respect to such insurance, within 15 days from its receipt. No insurance shall be cancelled, modified or allowed to expire or lapse during the term of the PCM. In case of failure of to do so, railway shall take the insurance with the Consultant as beneficiary and recover the amount so spent from the Consultant. 3.1.16 Control on variation in quantity: It shall be the duty of the Consultant to keep a tag on variation in quantities in contracts and raise alarm sufficiently in advance to enable railway to take necessary corrective action. 3.1.17 Performance Guarantee: The consultant shall ensure execution of work with due controls on safety, quality, cost and projects progress. To ensure this, Performance Guarantee shall be deposited with railways by the Consultant. 3.1.18 Payments to the Consultant: Payments to the Consultant shall be made a) monthly @ of 80% of the accepted man-month rates as per actual deployment of staff duly certified by the Project Engineer, b) 10% of the accepted manmonths shall be released proportionate to the average financial progress of the construction contract for which the PMC has been appointed, c) balance 10% of the accepted man-months shall be released on successful commissioning of the project in two parts first being 6% on preparation & submission of final bill and second part being 4% @ 1% each quarter. In case any of the relevant key personal/technical staff remains unavailable during important activities, like pre-non-interlocking, non-interlocking and commissioning of project, recovery will be made at the rate of three times the payable revenue. 3.1.19 For quality assurance, work tender shall be provided with PMC: While works tender shall provide for PMC to ensure quality including positioning of programme expert, quality expert and safety expert, the PMC shall ensure that the works contractor puts this in place and see that the same is properly implemented. The Consultant shall be responsible for obtaining approval for change in design and scope of the work, if any warranted during project execution, for construction methodology as proposed by the works contractor, for timely reaching of milestones fixed, and for good performance of the asset created during defect liability period.

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Tenders, contracts and arbitration 3.1.20 Allocation of funds for PMC: For successful implementation of railway mega projects for which Consultants are engaged, commensurate allocation of funds shall be provided every year to meet with the physical target. 3.1.21 Amendments to the Codal provisions in Engineering & Finance Codes on account of introduction of PMC: Amendments to the Codal provisions in Engineering & Finance Codes on account of introduction of PMC shall be undertaken after having adequate experience on PMC. For the time being, suitable clauses have been introduced in the tender documents (Model Tender Document). 3.1.22 Cost of PMC not to exceed D&G charges: The cost of PMC and railway establishment combined together shall not exceed provisions under Direction & General (D&G) charges under the sanctioned estimate for the project concerned. 3.1.23 PMC tenders to be finalised by officer(s) not below the Senior Administrative Grade (SAG) rank: All PMC tenders irrespective of its value shall be finalised by tender committee of level not less than SAG officers. 3.1.24 PMC personnel with inadequate experience, to be trained at IRISEN: PMC concept being new to the railways, there is need to develop expertise for railway related works. Since the existing PMC consultants may not have direct railway project experience, after award of the contract, a few select supervisory personnel of PMC consultant should undergo training at Indian Railway Institute of Civil Engineering (IRISEN), Pune, which has already developed training modules on PMC. The cost of training and other expenditure in this regard shall be born by the PMC Consultant. 3.2 Qualifying criteria: Criteria to qualify for validity of the offer shall be i) Technical eligibility, ii) Financial Eligibility, iii) Qualification and Experience requirement of key personal. Only those offers which are considered as valid based on the Minimum qualifying criteria conditions shall be taken up for evaluation of technical bids. 3.2.1 Minimum qualifying criteria for offer: Minimum criteria to validate the offer shall be: i) The tenderer must have paid the cost of tender document. ii) The tenderer must have attached the earnest money deposit amount with tender document technical bid. iii) The tenderer should be valid, legal and duly registered/ incorporated entity-individual/firm/society/company registered in India or a valid Joint venture Firm/ Consortium. iv) The tenderer should not have been black listed. v) The tenderer should not have been in conflict of interests, as defined under paragraph 3.1Guidelines for implementation of section-II, Project Management Consultancy, under the current chapter.

96

It is pertinent to note the difference between validity and eligibility of the offer. A minimum qualifying criteria for offer is required to be fulfilled before consideration of eligibility of the tenders technical bid. 3.2.2 Technical Eligibility: To adjudge technical eligibility of the PMC tender i) Conditions for technical eligibility are required to be fulfilled and ii) the tender is evaluated for technical eligibility as per laid down norms. 3.2.2.1 Conditions for technical eligibility: The tenderer shall be considered technically eligible if his Technical Capacity is adjudged to be adequate if: The single entity tenderer or the lead member of a consortium as the case may be, shall have, during the previous five financial years and the current financial year till the Tender Submission Date (TSD) of the tenders, completed one assignment in respect of project management services, construction supervision/ monitoring, proof checking/ design coordination, as the case may be. One eligible assignment relating to a railway/metro project shall be scored as two eligible assignments. #Eligibility assignment: Value of such consultancy assignments for consideration of technical capacity shall be at least `****(equivalent to 0.5% of the cost of the project for which the subject consultancy tender is being called) in case of experience on railway project, or `**** (equivalent to 0.75% of the cost of the project for which the subject consultancy tender is being called) in case of experience on non-railway project; and the same has been completed and full payment received by the tenderer prior to Tender Submission Date (TSD). 3.2.2.2 Evaluation of the technical offer: Only those tenderers whose tenders are found to be responsive* and who meet the eligibility criteria specified in the tender shall qualify for evaluation under this section. Tenders not meeting with the requirements at any stage as specified in tender** shall be rejected. Tenders will be evaluated on the basis of tenderers experience, its understanding of Terms of Reference (TOR), proposed methodology and work plan, and experience of key personal. Only those tenderers whose technical offer score 70 points or more out of 100 shall qualify for further consideration, and shall be ranked from highest to the lowest on the basis of their technical score (ST). *The tender is considered to be responsive if: It is received as per Letter of technical offer and letter of financial offer. It is received on or before the tender submission time and date including any extension thereof. It is accompanied by the EMD under provisions of tender. It is signed, sealed, hard bound and marked in conformity to the provisions of the tender. It is accompanied by power of attorney with clear evidence of authority for persons executing the Power of Attorney, as per tender. 97 Pramod P. Goel

Tenders, contracts and arbitration It contains all the information as requested in formats specified in the given tender document; and It does not contain any condition or qualification.

**Sequence of evaluation shall be as follows: First, responsiveness shall be examined. Only the tenders found to be responsive will be examined further for completeness and adequacy of all legal documents submitted as part of the tender. Only the tenders that pass this stage of examination shall be examined for technical capacity and financial capacity. Thereafter other eligibility requirements such as conflict of interest etcetera shall be checked for compliance. Tenders not qualifying at any stage specified here shall be rejected at that stage itself. The railway shall, subsequently, carryout evaluation of the technical offer and financial offers, in that order, as mentioned above. 3.2.2.3 Eligibility for key personnel: Qualification and Experience required of key personals shall require: i) List of Key personnel: The tenderer shall offer and make available the Key personnel as per the list prescribed in the tender. The CAO/C in consultation with FA&CAO/C may modify the type and number of key personnel, their qualification, experience, number of eligible assignments etcetera in the eligibility condition of the tenderer depending upon the nature of the project, its scope and requirement. It is pertinent to note that the key personnel eligibility criterion given here is general in nature while specific requirements shall be given in the tender documents floated by railway from time to time, while Technical and Financial eligibility criteria have been taken, from the model tender document issued by Railway Board, for better appreciation. A suggested list of key personnel for PMC has also been given in the Model Tender Document. ii) The model tender document issued by Railway Board is in Volume-I & Volume-II. While Volume-I contains standard fixed clauses to remain unchanged in all PMC contracts, Volume-II contains variable clauses which may be changed by concerned zonal railways with the approval of CAO/C or Principal Head of Department (PHOD) and concurrence of FA&CAO/C or FA&CAO as per requirements in each PMC contract. Since in the proposed PMC model, the responsibility of measurement and billing has been assigned to the works contractor, it is necessary that the works contractor has proper team of technically qualified personnel.

iii)

98

iv) Item Code

1.

Scoring criteria for evaluation of Technical offer: Parameter

Firms relevant experience

Maximum Criteria marks

25 Full marks will be awarded to the tenderer having highest number of #Eligible assignments in respect of project management services or construction supervision services among the tenderers, while the Tenderer having the number of #Eligible assignments required for eligibility will be awarded 50% of the full marks; other tenderers will be awarded marks pro-rata between above two extremes based on the number of #Eligible assignments undertaken by the tenderer. Evaluation will be based on the quality of submissions.

2.

Full marks for each key personnel, as specified in the tender, will be awarded to the candidate having the highest number of #Eligible assignments amongst all candidates proposed by various tenders against that key personnel, while the candidate having the number of #Eligible assignments required for eligibility, as specified in the tender, will be awarded 50% of full marks; other candidates will be awarded marks pro-rata between above two extremes based on number of #Eligible assignments undertaken by each of them. # See paragraph 3.2.2.1 of current section and chapter.

3.

Proposed methodology & work plan Relevant experience of the Key personnel

70

3.2.3 Short listing of technically eligible offers: Technically pre-qualified tenders shall be shortlisted for financial eligibility. In case only one tender is shortlisted the tenders acquiring marks between 50 and 70 may also be included such that the number of prequalified tenders remains limited to two. Railway shall intimate the tenderers of rejection of their technical offer and also at any other stage. The tenders rejected at technical stage shall be destroyed by railway after completing selection process and no correspondence to this effect shall be entertained there after. 3.2.4 Financial Eligibility criteria: Once the technical bids are evaluated, recommended for acceptance and approved, the financial bids of shortlisted tenderers shall be opened. To adjudge financial eligibility of the PMC tender i) Conditions for financial eligibility are required to be fulfilled and ii) the tender is evaluated for financial eligibility as per laid down norms. 3.2.4.1 Conditions for financial eligibility: The tenderer shall be considered financially eligible if his Financial Capacity is adjudged to be adequate if: 99 Pramod P. Goel

Tenders, contracts and arbitration The single entity tenderer or the lead member of a consortium as the case may be, shall have achieved a minimum gross turnover of `**** (equivalent to 0.75% of the cost of the project for which the subject consultancy tender is being called) from any type of Consultancy services covering all sectors including railways, in current and immediately preceding three financial years. 3.2.4.2 Evaluation of the financial offer: For the purpose of evaluation, the total cost shall include all taxes and duties for which railway will make payments to the consultant. Each financial proposal shall be assigned a financial score (Sr) Railway will determine whether the financial proposal is complete, unqualified and unconditional. Any offer with conditions attached, having financial bearing, shall summarily be rejected being nonresponsive. 3.3 Evaluation, method of scoring and criteria: Evaluation of PMC tender is either Quality and Cost Based Selection (QCBS) or Combined Quality Cum Cost Based Selection (CQCCBS). The selection of lowest eligible tenderer is done based on marks scored by the tenderer during evaluation of the Technical offer and evaluation of financial offer being financially lowest or a combination of marks scored during evaluation of technical offer combined with marks scored during evaluation of financial offer, depending upon method of evaluation used. 3.3.1 Quality and Cost Based Selection (QCBS) method: Quality and Cost Based Selection (QCBS) method of evaluation is adopted for works contract costing up to `100 crore. 3.3.2 Combined Quality Cum Cost Based Selection (CQCCBS) method: Combined Quality Cum Cost Based Selection (CQCCBS) method of evaluation of tenders is adopted for works contracts costing more than `100 crore. 3.3.3 Selection of the valid tenderer: Under QCBS method of selection the tenderer placed on highest score out of the list in hierarchical order from maximum score to least score, during technical evaluation, and with the tendered offer of cost least as compared to other valid tenderers, shall be considered selected for award of contract, if no negotiations are contemplated. Under CQCCBS method of selection, technical score ST will be allotted weightage of 70% while the financial score SF will be allotted weightage of 30%. Offers will be ranked from the highest as H-1 followed by H-2, H-3 & so on, in descending order from highest to lowest, according to their combined score of technical offer ST and financial offer SF. The lowest financial offer (FM) will be given a financial score (Sr) of 100 points and the financial scores of other offers will be computed as: 100

SF = 100xFM/F; Where F= Amount of financial offer; FM = lowest financial offer and SF = financial score. Combined score S of technical offer ST and financial offer SF shall be computed as: S = ST x TW + SF x FW Where S = combined score; ST = Technical score; SF = financial score and TW and FW are weightage assigned to technical offer and financial offer respectively, which shall be 0.7 & 0.3 respectively. The tender securing the highest combined score shall be ranked as H-1 and shall be considered for award of contract if negotiations are not contemplated. In either case if negotiations are required for reduction of cost, the same shall be carried out and further action shall be taken thereafter.

*****

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Tenders, contracts and arbitration

CHAPTER-IV
POST CONTRACTUAL MATTERS 4.0 Post contractual matters: With the acceptance of the LOA by the tenderer, he is supposed to start mobilising his organisation, men and material for execution of the work. The tenderer turned contractor may need i) mobilisation advance for initial investment which he shall be paying back though on-account bills along with interest thereupon, at the rate specified by the railways at the time of disbursement of the advance. The contractor can sustain progress only if he is released money against his onaccount bills. The bills can only be furnished for the work executed so much as to constitute milestones as defined in the contract and for which measurements have been filled in the measurement book. Engineer supervising the work shall ii) fill in the measurement book after ensuring that the work for which measurement is to be done has been executed and the material used is of the quality as specified in the specifications in the tender. How so ever the work schedule is prepared in case of work schedule based tenders or the scope of work defined, it is always possible for some unforeseen situation to arise necessitating addition of work to the original work contract resulting in iii) variation to the original scope and cost of the contract. Work is required to be completed within the date of completion as prescribed in the letter of acceptance. In case the work trails behind for the laxity on the part of railway in giving site of work or plans and diagrams or release of payments timely affecting the contractors cash flow or other such amenity as required for execution of work or on the part of the contractor delaying mobilisation of men, machinery and material or any other resources necessary for execution of the work, the iv) date of completion may be required to be extended from time to time. It shall always be aspired that the work is completed, including maintenance if an integral part of the contract, and final payments are released to the contractor instead of penalising him and getting the balance part of the work done through another agency. However if at all it be so the v) contract shall be determined while taking care of legal precautions lest it becomes a source of legal hassle. 4.1 Financial Advance: Advance to the contractor may be given, depending upon the requirement, for i) Mobilisation of recourses and setting up of the office at work site etcetera i.e. Mobilisation Advance ii) Advance against machinery and equipment i.e. Machinery Advance and iii) Acceleration advance. Each of such advances against mobilisation and machinery shall be limited to 10% of the total contract value, and for acceleration, limited to 5% of total 102

contract vale or `5 lakh, whichever is less (Railway Boards circular number 85/WI/CT/23-GCC, dated 10.2.87). 4.1.1 General conditions for granting advance: No advance shall ordinarily be granted for the works costing less than `50 Lakh even if these works are specialised or capital intensive. The General Manager is delegated with the powers to grant in exceptional cases, an advance up to a maximum of `5 Lakh in respect of contract value of less than `50 Lakh if the tenderer insists payment of such advances as a part of his offer. The powers should be exercised only on the basis of recommendation of the Chief Engineer duly concurred by Associate Finance. 4.1.1.1 Rate of interest: Rate of interest to be levied will be 14%. 4.1.1.2 Recovery of Advance if granted: Recovery of the advance should be made from the contractor through on-account bills on pro-rata basis commencing from the stage at which 15% of the work has been completed and entire amount recovered before 85% of the work has been completed. 4.1.2 i) Mobilisation advance: The advance should be payable in 2 stages: Stage- I: 5% of the contract value against an irrevocable bank guarantee from a nationalised bank in India or the State Bank of India in a form acceptable to the Railways, immediately after signing the contract documents. Stage- II: 5% of the contract value on mobilisation at site of establishment, setting up offices and bringing equipment, actual commencement of work, against an irrevocable bank guarantee from a nationalised bank in India or the State Bank of India in a form acceptable to the Railways at the time of mobilization of site establishment, setting up offices and bringing equipment.

ii)

4.1.2.1 Rate of Interest on the mobilisation advance paid: The advance shall carry rate of interest of 14% per annum (Railway Boards letter number 2007/CE.I/ CT/18, dated 28.9.2007). 4.1.2.2 Recovery of the mobilisation advance: The mobilisation advance may be recovered through on-account bills in instalments, the recovery commencing when the finalisation of the work executed and paid for, reaches 15% of the provisional value of the contract and shall be completed when the value of the work executed reaches 85% of the original value of contract. The instalments on each on-account bills will be on pro-rata basis. 4.1.3 Advance against Machinery and Plant: Advance on the security of machinery and equipment brought to site should be limited only to New Machinery and equipment which are essentially required for the work and involve a substantial outlay. The advance should not exceed 75% of the purchase price of such equipment. The extent of this advance should be limited to a maximum of 10% of the contract value and the advance should be payable only if the plant and 103 Pramod P. Goel

Tenders, contracts and arbitration equipment have been brought to site and hypothecated to President of India by a suitable bond or hypothecated to a bank. The plant and equipment should also be insured for the full value and for the entire period they are required for the work. The advance shall be insured making it full interest free. 4.1.3.1 Rate of Interest on the advance paid against Machinery and Plant: The advance shall carry rate of interest of 14% per annum (Railway Boards letter number 2007/CE.I/ CT/18, dated 28.9.2007). 4.1.3.2 Recovery of the advance against Machinery and Plant: The advance shall be recovered in instalments through on-account bills. The instalment on each on-account bill will be on pro-rata basis. The recovery for the amount shall be completed by the time the value of the contract executed, reaches 85% of the original value of contract. 4.1.4 Acceleration Advance: Acceleration Advance meant for accelerating the progress of work may be granted during the course of execution of the contract. Each case should be dealt with on merit. General Manager shall be empowered to sanction advance for the contract within his powers on the basis of recommendation of the Chief Engineer incharge with the concurrence of Associate Finance. The advance should not exceed 5% of the value of the contract or `5 lakh whichever is less. 4.1.4.1 Rate of Interest for acceleration Advance: The rate of interest to be levied will be 20% p.a. 4.2 Measurement and payments to the contractor: Under contractual system of execution of a work payment can be made to the contractor only after filling measurement in the measurement book. Measurement shall be carried out by the Section or Senior Section Engineer of the department, who supervised execution of the work. The bill is submitted by the contractor only for the measured work.

4.2.1

Measurement book: Standard Measurement Book (MB), each page of which is numbered, shall be issued to the Section/ senior Section Engineer, who is earmarked for carrying out the measurements, under his signatures. Format of the Measurement Book, along with guide lines for filling the measurements are supported by the clauses 1313,1314, 1315, 1316 and 1317 of Engineering Code embodying all Correction Slips issued up to 45, dated 16.07.08, and Railway Boards letter No. 2007/ce.1/ct/8 dated 9.5.08, placed as AnnexureX, amongst last pages of this book. A new book may be opened in case of big works which may require filling of one or more books. This shall help in maintaining the continuity of the measurements. For smaller works measurements of more than one work may be filled in one book. 104

4.2.2 Measurement: Time and again, measurement has been the most crucial part of the billing process as such nine of the best canons of measurement as given below shall be followed with utmost care. Measurement is an activity which not only i) measures the quantity but ii) also verifies the specifications for execution of work and material used. The person doing measurement, as such is required to certify in the MB that the work has been executed as per specifications: i) ii) iii) Measurement shall be entered directly in the MB, without recording elsewhere. Entry in the MB shall be done with ink and not using pencil. No page of the MB shall be torn, mutilated, corrected by putting white ink (whitener) or smeared with ink or adopted any other method leading to doubt on the integrity of the MB holder. Corrections if any shall be done by cutting the entry with one stroke of pen in such a way that the entry deleted is clearly legible. Measurement shall be filled in presence of the contractor or his authorised representative, who shall be advised for the same, well in advance, however in case neither the contractor nor his representative turns up, the measurement shall be filled in the book after ensuring adequate record about the contractor being advised well in time. The contractor or his authorised representative shall sign the measurement on the MB, jointly with the person carrying out measurement, with No Objection remarks. Proper land marks of the measured portion of the work shall be mentioned in the MB for easy identification of the measurement being filled in such a manner that as and when test check is required to be carried out by an authority or any of the investigating agencies wanting to cross check the measurement, there shall be no other identical site. Engineer is required to carry out test checks to the extent of 20% of the total work filled in the MB or any other percentage as specified from time to time. In case the any error in the measurement is noticed during the test check, the Engineer shall carry out test check beyond 20% say up to 35% and if any error is again noticed in the measurement done, he shall test check cent percent measurements. Engineer is also required to carryout cent percent test check on hidden work i.e. work done underground, such as casting of underground foundations, as such he shall supervise the foundation casting personally to the extent possible. Measurement shall be carried out for the activities covering complete contents of each work schedule in case of work schedule based contract and covering one milestone in case of turnkey contract.

iv)

v)

vi)

vii)

viii)

ix)

4.2.3 Payment to the contractor: As and when the MB is filled, test check is carried out and the engineer has issued certificate for satisfactory completion of the measured part of the work, the contractor shall submit the bill to the 105 Pramod P. Goel

Tenders, contracts and arbitration purchaser, for the same. The purchaser shall arrange payment after satisfying him self of its correctness, after deducting income tax, trade tax, security money due till the billing date, interest on mobilisation or any other advance and other dues incorporated in the contract conditions. 4.3 Variation in scope of the work: Although utmost care shall be exercised to ensure that there is no or least variation in the contracted quantity but still variation in the contracted amount/quantity is almost unavoidable which may occur due to addition of existing or new items of work schedules and may result in financial implications viz. i) increase or decrease within 25% of the contract value, ii) reduction beyond 25% of the total cost of the work, iii) Increase beyond 25% of the total cost of the work. 4.3.1 Variation in existing items of schedule or introduction of new schedules of work: Variation may be i) due to increase or decrease in quantities of existing SOR based or non-SOR based schedule of works and due to ii) addition of new SOR based or non-SOR based schedule of works to the existing schedule of works. 4.3.1.1 Variation in existing quantities of work schedules: Work schedules in the scope of a contract may be SOR or non-SOR based or both. While execution of the work the quantities of these work schedules may vary depending upon actual site requirements. 4.3.1.2 Addition of new items of work schedule: During execution of the work, a new SOR or non-SOR item may be required to be introduced. When the SOR item is required to be introduced, the same can be done on already accepted rates for the chapter to which the given SOR pertains, after examining financial implications of the contractual provision and taking suitable action according to the ensuing paragraphs. However in case of non-SOR items, when it is not practically possible to get the work pertaining to the given non-SOR item, to be got executed through another contract, the new non-SOR work schedule shall be created and the cost shall be worked out based upon the rates of material and labour already available for similar SOR to the extent possible or based on prevailing market rates for the same. The rate analysis shall be got vetted from associated finance, got approved from an authority at level competent to do so, and the rate of such non-SOR item as approved shall be offered to the contractor for acceptance. The work shall be executed by the contractor on acceptance by him of the given rates only. In case of non-acceptance of the rates by the contractor the same shall be negotiated in association with finance and in case of failure the work shall be planned for execution by another agency for which the working contractor shall have no claim of damages (GCC 39). 4.3.2 Financial implications of Variation: In any case of variation in existing quantities of SOR or non-SOR items of work schedules or addition of SOR or non-SOR items of work schedules there is a variation in cost of work 106

which in turn has financial implications in case of work schedule based as well as turnkey contract. A) In case of work schedule based tender: The quantities of work schedule are approximate with a margin of 25% of the total cost of the work, without change in rates. However there is every possibility of some part, integral to the total work, affecting completion, getting omitted from the work schedule, new work schedule has to be generated, rates finalised and agreed with the contractor and executed. B) In case of turnkey tender: The work is awarded on lump sum basis under the defined scope of work. In this case also, as such new items of schedule, which are integral to the scope of work but not included in the scope, shall have to be created, rates finalised and agreed between the railway and the contractor. Cost of such addition of new work schedule shall be payable in addition to the agreed cost of the work. However in case the scope of the work is not defined unambiguously, many such reasons for creation of new work schedules may arise out of grey area in the scope, raising doubts for genuineness of such new work schedules. C) Variation with increase or decrease within 25% of the contract value: So far as variation within 25 takes place the contract shall not be affected financially. However in case of individual NS items in the contract shall be operated with variation of 25% and payment shall be made as per agreement rate (Railway Boards circular number 2007/CE.I/CT/18, dated 8.9.2007). D) Variation beyond 25% on higher side: Railway Board, as per their circular number 2007/CE.I/ CT/ 18, dated 8.9.2007, have issued guidelines on variation beyond 25% further modified under their circular number 2007/CE.I/ CT/ 18. Pt.XII, dated 31.12.2010, as detailed hereafter: 1) In case of increase in quantity of an individual item by more than 25% of the agreement quantity is considered as unavoidable, the same shall be got executed by floating a fresh tender. If floating a fresh tender is considered not practicable, quantity of that item may be operated in excess of 125% of agreed quantity subject to following conditions: Operation of an item by more than 125% of agreement quantity needs the approval of an officer of the rank not less than a Senior Administrative Grade (SAG): i) Quantities operated in excess of 125% but up to 140% of the agreement quantity of concerned item shall be paid at 98% of the rate awarded for that item in that particular contract;

a)

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Pramod P. Goel

Tenders, contracts and arbitration Quantities operated in excess of 140% but up to 150% of the agreement quantity of the concerned item shall be paid at 96% of the rate awarded for that item in that particular contract; iii) Variation in quantities of individual items beyond 150 % will be prohibited and would be permitted only in exceptional unavoidable circumstances with the concurrence of associated finance and shall be paid at 965 of the rate awarded for that item in that particular contract. Variation in quantities as per above formula will apply only to the individual items of contract and not on overall contract value. Execution of quantities beyond 150% of the overall agreement value should not be permitted and, if found necessary, should be only through fresh tenders or by negotiating with existing contractor, with prior personal concurrence of FA &CAO/ FA &CAO(C) and approval of General Manager. ii)

b) c)

Vitiation must be checked due to proposed increase of quantities before accepting the variation. E) Variation beyond 25% on negative side: Variation beyond 25% on negative side is the cause of concern for the contractor as well as for the railway as while the contractor looses his profit, against as anticipated, because of reduction in the work, the foul play is anticipated if the variation happens to take place against low value items of low profit to the contractor. In this case vitiation must be checked before closing the contract. a) The contract signing authority can decrease the items up to 255 of individual item without finance concurrence. b) For decrease beyond 25% for individual items or 25% of the contract agreement value, the approval of an officer of the rank not less than a Senior Administrative Grade (SAG) may be taken, after No Claim certificate from the contractor and with finance concurrence, giving detailed reasons for each such decrease in the quantities. c) It shall also be certified that the work reduced will not be required in the same work later. F) Variation when tender is accepted at zonal railway level or below: For the tenders accepted at the Zonal Railways level, i) the variation in the quantities will be approved by the authority in whose powers the revised value of the agreement lies. ii) For tenders accepted by General Manager, variations up to 125% of the original agreement value, even if the revised agreement value is beyond GMs competence to accept tenders, may be accepted by General Manager. Variation when tender is accepted by Railway Board Members or Minister of Railways: For tenders accepted by Railway Board Members or by Minister of Railways, variations up to 110% of the 108

G)

original agreement value may be accepted by General Manager (Railway Board circular number 2007/CE.I/CT/18, dated 28.09.2007). 4.4 Vitiation of the contract: In case of work schedule based tenders if rates of certain work schedules are quoted high and quantity of such items is increased so much so, besides at the same time quantity of other work schedules does not vary such that the total cost of the work contract becomes more than the quoted cost of the work by next above to the lowest valid bidder i.e. L-2, making L-2 as L-1 and vice versa, the contract stands vitiated. This tantamount to be converted into single tender requiring for the approval of the General Manager under associated finance concurrence. At first hand adequate care shall be taken while preparing work schedules to ensure that job content of such work schedule is prepared in a way such that the work schedule does not become a lucrative item and also that the quantity of such work schedule is kept after ensuring site requirements based upon a survey. Further more the officer incharge in field shall examine the statement compared with the offered rates of all the valid bidders before permitting any variation in the quantity of work schedules. In case it is observed that the variation may result in vitiation of the contract such additional quantity shall be got executed through another agency or rates shall be negotiated for reduction with the working contractor. 4.5 Date of completion of the work: The contract provides specific time for completion of work which is mentioned in the Letter of Acceptance (LOA) issued in favour of the contractor. With the issue of the LOA, which if accepted by the tenderer, the time given starts to lapse, accordingly the date of completion is specified in the LOA it self. Completion time is the essence of the contract and is taken seriously by the Railways. The contract remains valid only till the expiry of date of completion (DOC) which is another important factor of date of completion. The extension to the date of completion may be granted, to the contractor, depending upon the request made by the contractor well in time before the date of expiry of the DOC, with or without imposition of liquidated damages, as penalty, in conformity to the provisions of paragraph 17 of the GCC. There are two formats in vogue for grant of extension of date of completion one without imposition of penalty and other with imposition of penalty. 4.5.1 Extension of date of completion without liquidated damages: On request by the contractor for grant of extension of date of completion of the work in continuation to the original specified date of completion or extended date of completion, the date shall be extended by railways if the reasons given are considered to be valid with or without liquidated damages. It is not necessary to 109 Pramod P. Goel

Tenders, contracts and arbitration impose liquidated damages even if it is due to fault of the contractor, under other such valid considerations warranting so. 4.5.2 Extension of date of completion with liquidated damages: On request by the contractor for grant of extension of date of completion of the work in continuation to the original specified date of completion or extended date of completion, the date shall be extended by railways with imposition of liquidated damages if the contractor is not performing well and it becomes necessary to penalise him. Railway Board as per their circular number 2007/CE.I/CT/18 dated 28.9.2007 have relaxed the existing clause 17(B) of GCC which provides for recovery of liquidated damages from the contractor for delay in completion of work, and have decided that the authority competent for granting extension to the currency of contract under clause 17(B) of GCC may also consider levy of token penalty, as deemed fit, based on the merit of the case. It is pertinent to understand that the agreement is lapsed with the expiry of the DOC the relationship between the purchaser and the contractor also stands dissolved legally. As such action to issue notice for termination of the contract is required to be taken well in advance with narrowing time without waiting for application from the contractor for the DOC extension. 4.5.3 Completion of the work: Junior most officer incharge of the work is the Assistant Engineer while the work is supervised by the Section/Senior section/ Junior Engineer. The officer incharge shall satisfy himself that the work is done to the specifications for execution and material and is ready to be used or is in use by the railway and thereupon he shall issue the Completion Certificate for satisfactory completion of part or whole of the work. No payment shall be disbursed without the completion certificate. 4.6 Failure of contract: In case the contractor is not able to progress the work and it becomes imminent to determine the contract, it should be within the validity of date of completion and under very grave circumstances, after the valid date of completion of the work. Work may be determined owing to the default of contractor, non-performance and not applying for extension for date of completion, abandoning the contract or any other reason. 4.6.1 Determination of contract owing to default of contractor: As the contract is required to be executed faithfully in compliance to the agreed terms and conditions within stipulated time, a lapse on the part of contractor any one or all of the reasons as listed below under GCC clause 62 and other clauses as referred to, the contract may be determined:

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1. i) ii)

iii)

iv) v) vi) vii) viii) ix)

x) xi)

xii)

xiii)

If the Contractor should: Become bankrupt or insolvent, or Make an arrangement with of assignment in favour of his creditors, or agree to carry out the contract under a Committee of Inspection of his creditors, or Being a Company or Corporation, go into liquidation (other than a voluntary liquidation for the purpose of amalgamation or reconstruction), or Have an execution levied on his goods or property on the works, or Assign the contract or any part thereof otherwise than as provided in Clause 7 of these conditions, or Abandon the contract, or Persistently disregard the instructions of the Engineer, or contravene any provision of the contract, or Fail to adhere to the agreed programme of work by a margin of 10% of the stipulated period, or Fail to remove materials from the site or to pull down and replace work after receiving from the Engineer, notice to the effect that the said materials or works have been condemned or rejected under Clause 25 and 27 of these conditions, or Fail to take steps to employ competent or additional staff and labour as required under Clause 26 of the conditions, or Fail to afford the Engineer or Engineers representative proper facilities for inspecting the works or any part thereof as required under Clause 28 of the conditions, or Promise, offer or give any bribe, commission, gift or advantage either himself or through his partner, agent or servant to any officer or employee of the Railway or to any person on his or on their behalf in relation to the execution of this or any other contract with this Railway; A) At any time after the tender relating to the contract has been signed and submitted by the contractor, being a partnership firm admit as one of its partners or employ under it or being an incorporated company elect or nominate or allow to act as one of its directors or employ under it in any capacity whatsoever any retired engineer of the gazetted rank or any other retired gazette officer working before his retirement, whether in the executive or administrative capacity, or whether holding any pensionable post or not, in the Engineering Department of the Railways for the time being owned and administered by the President of India before the expiry of two years from the date of retirement from the said service of such Engineer or Officer unless such Engineer or officer has obtained permission from the President of India or any officer duly authorized by him in this behalf to become a partner or a director or to take employment under the contractor, as the case may be, or B) Fail to give at the time of submitting the said tender: a) The correct information as to the date of retirement of such retired engineer or retired officer from the said service, or as to whether 111 Pramod P. Goel

Tenders, contracts and arbitration any such retired engineer or retired officer was under the employment of the contractor at the time of submitting the said tender, or The correct information as to such engineers or officers obtaining permission to take employment under the contractor, or Being a partnership firm, the correct information as to, whether any of its partners was such a retired engineer or a retired officer, or Being an incorporated company, correct information as to whether any of its directors was such a retired engineer or a retired officer, or Being such a retired engineer or retired officer suppress and not disclose at the time of submitting the said tender the fact of his being such a retired engineer or a retired officer or make at the time of submitting the said tender a wrong statement in relation to his obtaining permission to take the contract or if the contractor be a partnership firm or an incorporated company to be a partner or director of such firm or company as the case may be or to seek employment under the contractor, and after expiry of 48 hours notice, a final termination notice on a proforma prescribed for the same, should be issued.

b) c) d)

e)

Then and in any of the said clause, the Engineer on behalf of the Railway may serve the Contractor with a notice in writing to that effect and if the Contractor does not within seven days after the delivery to him of such notice proceed to make good his default in so far as the same is capable of being made good and carry on the work or comply with such directions as aforesaid to the entire satisfaction of the Engineer, the Railway shall be entitled after giving 48 hours notice in writing under the hand of the Engineer to rescind the contract as a whole or in part or parts (as specified for such notice). 2. Right of Railway after rescission of contract owing to default of Contractor: In the event of any or several of the courses, referred to in subclause (A) of this clause, being adopted: a) The Contractor shall have no claim to compensation for any loss sustained by him by reason of his having purchased or procured any materials or entered into any commitments or made any advances on account of or with a view to the execution of the works or the performance of the contract and Contractor shall not be entitled to recover or be paid any sum for any work there to for actually performed under the contract unless and until the Engineer shall have certified the performance of such work and the value payable in respect thereof and the Contractor shall only be entitled to be paid the value so certified, b) The Engineer or the Engineers Representative shall be entitled to take possession of any materials, tools, implements, machinery and buildings on the works or on the property on which these are being or ought to have been executed, and to retain and employ the same in the further 112

c)

d)

execution of the works or any part thereof until the completion of the works without the Contractor being entitled to any compensation for the use and employment thereof or for wear and tear or destruction thereof, The Engineer shall as soon as may be practicable after removal of the Contractor fix and determine ex-parte or by or after reference to the parties or after such investigation or enquiries as he may consider fit to make or institute and shall certify what amount (if any) had at the time of rescission of the contract been reasonably earned by or would reasonably accrue to the contractor in respect of the work then actually done by him under the contract and what was the value of any unused, or partially used materials, any constructional plant and any temporary works upon the site. The legitimate amount due to the contractor after making necessary deductions and certified by the Engineer should be released expeditiously. The Railway shall not be liable to the Contractor any moneys on account of the contract until the expiration of the period of maintenance and thereafter until the costs of completion and maintenance, damages for delay in completion (if any) and all other expenses incurred by the Railway have been ascertained and the amount thereof certified by the Engineer. The Contractor shall then be entitled to receive only such sum or sums (if any) as the Engineer may certify would have been due to him upon due completion by him after deducting the said amount, but if such amount shall exceed the sum which would have been payable to the Contractor, then the Contractor shall upon demand pay to the Railway the amount of such excess and it shall be deemed a debt due by the Contractor to the Railway and shall be recoverable accordingly.

It is pertinent to note that when the contract is resiled or rescinded it is termination as if the contract had never been established while the determination of a contract shall be short closure on as it is where it is basis. Note: clause 7, 25, 27 & 28 of GCC are reproduced and placed as Annexure- VII, placed amongst last pages of the book. 4.6.2 Rescinding and Risk & Cost/ Performance guarantee: Under compelling circumstances when the contractor is not able to carryout the work and the contract is rescinded within validity of date of completion, the complete or balance quantity of the work is yet to be carried out, retendering is done. In case the cost of the complete or balance part of the work turns out to be more than the cost on which the contract which was rescinded, the difference of the two (for the balance quantity only) shall be loss to the railway which has to be made good. In such case the contract which had failed had to be rescinded at the risk and cost of the failed contractor, the losses thus incurred by the railway had to be realised by railway from him only. This used to be a difficult situation and in some cases the losses had to written-off. 113 Pramod P. Goel

Tenders, contracts and arbitration

In one such situation, in Central Organisation of Railway Electrification, when notices issued were ignored by the failed contractor for deposition of risk and cost amount due to be paid by him, all Indian railway organisations were advised to recover the amount in question out of the bills of the said contractor. The money was recovered. The contractor got aggrieved so much so that he made a by name complaint to the CVC, Railway Minister, CRB, CVO of CORE on some other pretext, against the officer who had signed the letter of recovery. The procedure of recovery of risk and cost amount from the failing contractor has since been dispensed with by introducing Performance Guarantee. The Performance Guarantee has to be deposited by the contractor within 30 days from the date of signing the Letter of Acceptance thereby retaining element of risk and cost as under clause 16(4) of GCC.

4.6.3 Determination of contract owing to non-performance and not applying for extension for date of completion: Under the circumstances the contract lapses due to contractor not applying for the date of completion and a contingency has arrived where timely action could not be taken by the contract signing authority, a notice, on the sample proforma placed amongst last pages of the book as annexure-V, claiming damages also for the failure on the part of the contractor should be issued to the contractor who has not sought/is not willing to seek extension even after the expiry of the date of completion, and the contract has ceased to exist with effect from the date of expiry; original or extended as the case may be (Railway Boards circular number 99/CE-I/CT/28(PT) Dated 17.5.2004).
Railways shall not extend date of completion suo-motu. 4.6.4 Revival of the contract within 48 hours after issue of termination notice: The contract is alive till the notice of termination is issued. As such there is no need for revival of the contract during this period. Once the notice is issued it can be withdrawn if the contractor is able to demonstrate his earnest intention to restart the work to the satisfaction of the authority taking the action. Once the 48 hours notice of termination is issued, revival of the contract , even if on the same terms and conditions, is possible only as a single tender, and would require the observance of all relevant orders relating to such tenders (Railway boards circular number 99/CE-i/CT/28 dated 24.5.2001). 4.7 Maintenance of confidential reports of contractors: In terms of Railway Boards circular number 85/W1/CT/23-GCC, dated 31.1.86, the confidential reports of the working contractors, on the format prescribed, shall be maintained in the organisation. The copy of the format is placed at Annexure -V amongst last pages of the book. Although such confidential reports of working contractors are usually maintained but the extent up to which these confidential 114

reports become instrumental in deciding award to a contractor with good or bad reports is not clearly spelt out. 4.8 Disputes: A disagreement or differences of any kind whatsoever, between the purchaser and the contractor, on any issue out of or in connection with the contract, during pendency or after completion or weather before or after the determination of the contract, is a dispute. The contract is guided by General Conditions of Contract, Special Conditions of Contract and the tender documents containing work schedules or defined scope of work in contract on Lump Sum basis i.e. Turnkey contracts or any other condition as agreed between the Contractor and the Railway. As and when the contractor is aggrieved due to occurrence of a dispute, he shall furnish his representation on the dispute in writing to the Railway along with his claims if any. If the claims are also financial, same shall be included in the claim letter giving amount involved and the reasons for accrual of the claim. The Railway shall examine and reply within 120 days from receipt of the contractors representation with reasons for deciding, by accepting or rejecting, the claims. In case the contractor is not satisfied with the decisions and the relief granted against his representation, he shall seek for arbitration from the sole arbitrator, the General Manager of the railway concerned. 4.9 Arbitration initiation of: Aggrieved upon the decisions communicated by railways against the contractors disputes and claims, the contractor may request for appointment of the arbitrator. The General Manager shall refer the matter to the Chief Engineer of the department concerned or the tender accepting authority, to examine the disputes and claims de-novo, who in turn shall seek the opinion of the Law officer concerned on the legal aspects of the matter, on the review by the Chief engineer, of the railway concerned. The General Manager shall order appointment of arbitrator or arbitration panel as the situation may be, referring to the arbitrator or the arbitration panel the disputes and the claims except the excepted matters. *****

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Pramod P. Goel

Tenders, contracts and arbitration

CHAPTER-V
CONDITIONS OF CONTRACT 5.0 Conditions of contract: No contract can work smoothly without properly defined conditions for dealing with the contract. So far as Indian Railway is concerned Ministry of Railway, Railway Board being the apex body regulates and maintains uniformity in dealing of the contracts, to ensure level playing. Accordingly the rules framed by the Railway Board are framed such that these can be implemented uniformly on all zonal railways while zonal railway/tender specific rules are framed by the zonal railways. Rules so framed by Railway Board, as such, are termed as General Conditions of Contract (GCC). The GCC is issued by Railway Board, amended from time to time through correction slips. The GCC can also be modified by the Railway Board based upon experiences generated from time to time by zonal railways, who may suggest for modifications which is considered and rules are modified/ clarified by the Railway Board as deemed fit. Certain rules and regulations are required to be framed by zonal railways also to meet with the requirements specific to the area of work as well as type of services. Conditions framed and modified by the zonal railways are termed as Special Conditions of Contract (SCC). 5.1 General Conditions of Contract (GCC): The General Conditions of (works) Contracts (GCC) of Engineering Department, accordingly applicable for all engineering departments of Indian Railways, is grouped as hand book Part I & II, Part I relating to Regulations for Tenders & Contracts and Part II to Standard General Conditions of Contract. The General Conditions of Contract, in the form of a printed book, is a paid document. Zonal railways adopt the GCC and sell to the contractors. Special Conditions of Contract, tailor-made to suit the tender in question supplement the GCC. 5.1.1 GCC Part- I, Regulations for Tenders and Contracts: This part of GCC, deals with directives and other guidance about tender documents and procedures for preparation and submission of the tenders. It Contains meaning of terms, definitions, application for registration, tender forms, Omissions and Discrepancies, Earnest Money, Care in submission of tenders, Right of railway to deal with tenders, Execution of contract documents and forms of contract documents with specimens attached as annexure.

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5.1.2 GCC Part- II, Standard General Conditions of Contract: This part deals with regulations during and post execution of work and runs in sixty four clauses grouped under major heads: 5.1.2.1 Definitions and Interpretations, covering clause 1; 5.1.2.2 General Obligations, covering clauses 2 to 18; 5.1.2.3 Execution of works, covering clauses 19 to 40; 5.1.2.4 Variations in extent of contract, covering clauses 41, 42 and 43; 5.1.2.5 Measurements, certificates & payments, covering clauses 44 to 53; 5.1.2.6 Labour, covering clauses 54 to 60; 5.1.2.7 Determination of contract, covering clauses 61 and 62; and 5.1.2.8 Arbitration, covering clauses 63 and 64. 5.1.3 Brief content is given against each such GCC clause:

Clause 1 Contains definitions of various terms like railway, Engineer, General Manager, Chief Engineer, Divisional Railway Manager, Engineers Representative, Contractor, Works, Specifications, Schedule of rates, Drawing, Constructional Plant, temporary works, site, period of Maintenance, Singular & plural , Headings & marginal headings. Clause 2 pertains to Execution co-relation & intent of contract documents. Clause 3 pertains to Law governing the contract & compliance to other regulation & bylaws. Clause 4 pertains to Communications to be in writing. Clause 5 pertains to Service of notices on contractor. Clause 6 pertains to Occupation & use of land. Clause 7 pertains to Assignment or subletting of contract. Clause 8 pertains to Assistance by Railway for stores. Clause 9 pertains to Railway passes. Clause 10 pertains to Carriage of materials. Clause 11 pertains to Use of ballast trains. Clause 12 pertains to Representation on works. Clause 13 pertains to Relics & Treasures. Clause 14 pertains to Excavated material. Clause 15 pertains to Indemnity by contractor. Clause 16 pertains to Security Deposit (SD), & Performance Guarantee (P.G) Clause 17 pertains to Force majeure, Price variation, Extensions i.e. time to be essence & extension of time as: 1) Extension due to modification. 2) Extension for delay not due to Railway/Contractor. 3) Extension of time for delay due to Railway. 4) Extension of time for delay due to contractor. Clause 18 pertains to 18(1) & (2) Illegal Gratification. Clause 19 pertains to: 1) Contractors Understanding. 2) Commencement of Works. 3) Accepted Programme of Work. 117 Pramod P. Goel

Tenders, contracts and arbitration 4) Clause 20 1) 2) 3) 4) Clause 21 Clause 22 1) 2) 3) 4) 5) Clause 23 Clause 24 Clause 25 Clause 26 Clause 27 1) 2) Clause 28 Clause 29 Clause 30 Clause 31 1) 2) 3) 4) 5) Clause 32 Clause 33 1) 2) Clause 34 1) 2) 3) 4) Clause 35 Clause 36 1) 2) Clause 37 Clause 38 Clause 39 Clause 40 Setting out of Works. pertains to: Compliance to Engineers instructions. Alterations to be authorised. Extra Works. Separate Contracts in connection with Works. pertains to Instructions of engineers representative. pertains to: Adherence to specifications and drawings. Drawings and specifications on the works. Ownership of drawings and specifications. Compliance with contractors request to details. Meaning and indent of specifications and drawings. pertains to Working during night. pertains to Damage to Railway property or private life & property. pertains to Sheds, store houses and yards. pertains to Provision of efficient & competent staff. pertains to: Workmanship & testing. Removal of improper work and material. pertains to Facilities for inspection. pertains to Examination of work before covering up. pertains to Temporary works. pertains to: Contractor to supply water for works. Water supply from Railway system. Water supply by Railway transport. Contractor to arrange supply of electric power for works. Electric supply forms the Railway system. pertains to Property in Materials & Plant. pertains to: Tools, plants & materials supplied by Railways. Hire of Railways plant. pertains to: Precautions during Progress of works. Roads and Water Courses. Provision of access to premises. Safety of Public. pertains to use of explosives. pertains to: Suspension of work. Suspension lasting more than 3 months. pertains to Rates for items of works. pertains to Demurrage and wharfage dues. pertains to Rates for extra items of works. pertains to: 118

1) Handing over works. 2) Clearance of site on completion. Clause 41 pertains to Modifications to contract to be in writing. Clause 42 pertains to: 1) & 2) Powers of modifications to contract. 3) Valuation of variations. Clause 43 pertains to: 1) Monthly statement of claims. 2) Signing of no claim certificate. Clause 44 pertains to Quantities in Schedule Annexed to contract. Clause 45 pertains to Measurement of works. Clause 46 pertains to: 1) On-Account payments. 2) Rounding off amounts. 3) On-Account Payments not prejudicial to final settlement. Clause 47 pertains to Maintenance of works. Clause 48 pertains to: 1) Certificate of Completion of works. 2) Contractor not absolved by Completion Certificate. Clause 49 pertains to Approval only by Maintenance Certificate. Clause 50 pertains to: 1) Maintenance certificate. 2) Cessation of Railways liability. 3) Unfulfilled obligations. Clause 51 pertains to: 1) Final payment. 2) Post payment audit. 3) Repayment of security deposit. Clause 51A pertains to Production of vouchers etcetera by the contractor. Clause 52 pertains to Withholding & lien in respect of sums claimed. Clause 52A pertains to Lien in respect of claims in other contracts. Clause 53 pertains to Signature on receipts for amount. Clause 54 pertains to Wages to labour. Clause 54A pertains to Apprentice Act. Clause 55 pertains to Provisions of Payments of Wages Act. Clause 55A pertains to Provision of Contract labour (Regulation and Abolition) Act 1970. Clause 56 pertains to Reporting of accidents to labour. Clause 57 pertains to Provision of Workmens Compensation Act. Clause 57A pertains to Provision of Mines Act. Clause 58 pertains to Railway not to provide quarters for contractors. Clause 59 pertains to: 1) Labour camps. 2) Compliance to Rules for employment of labour. 3) Preservation of Peace. 4) Sanitary arrangements. 119 Pramod P. Goel

Tenders, contracts and arbitration Outbreak to infectious disease. Treatment of contractors staff in Railway Hospitals. Medical facilities at site. Use of intoxicants. Non-employment of female labour. Restriction on the employment of retired engineers of Railway Services within two years of their retirement. Clause 60 pertains to: 1) Non employment of labour below the age of 15. 2) Medical certificate of fitness. 3) Period of validity of Medical fitness Certificate. 4) Medical re-examination of labour. Clause 61 pertains to: 1) Right of Railway to determine contract. 2) Payment on determination of Contract. Clause 62 pertains to: 1) Determination of contract owing to default of contractor. 2) Right of Railway after rescission of contract owing to default of contractor. Clause 63 pertains to: Matters finally determined by the Railway. Clause 64 pertains to: 1) Demand for Arbitration. 2) Obligations during pendency of arbitration. 3) Appointment of Arbitrators. Clause 65 pertains to: Price variation. (Under issue). 5.2 Special Conditions of Contract (SCC): Each tender/contract is unique in itself with certain special features related to the area in which work is to be executed and uniqueness attached to the work. To meet with such requirements, Special Conditions of Contract are framed and attached with the tender documents to be an integral part of Contract Agreement. SCC shall cover clauses not covered by the GCC and also to complement and supplement the GCC as and where needed. Special conditions of contract as given in the ensuing paragraphs are indicative only, these cover only general part of the conditions not conforming to any specific tender, besides some of the SCCs are supplement /compliment to GCC also, as such shall have to be tailor made for each such tender while some of the conditions given here may be common to majority of the tenders. 5.2.1 Clauses complimentary and supplementary to the GCC, inserted to SCC: To meet with the specific requirements of the given work, without coming in conflict to the original clause of the GCC, new condition(s) may be created by modifying the concerned clause of GCC, to suit the tenders requirements and added to Special conditions of Contract. 120 5) 6) 7) 8) 9) 10)

5.2.2 Stipulations which prevail: These Special conditions, the clause of the Tender conditions, the Instructions to Tenderers, Technical Specifications and the stipulations made in the schedule of rates and quantities, shall govern the work to be done under the given contract and/or in part supersession of the General Conditions of contract and Regulations for Tenders & Contracts and instructions to the tenderers and standard form of contract of Engineering Department (latest) embodying corrections up-to-date. Where there is any conflict between the Tender conditions and instructions to tenderers, Special Conditions, Technical Specifications & stipulations contained in the schedule of rates and quantities on the one hand and General Conditions of Contract on other hand, the provisions of SCC shall prevail. Any condition(s) stated by the tenderer in the covering letter or otherwise, submitted along with the Tender shall be deemed to be a part of the contract to such extent only, as have been explicitly accepted by the Railway. 5.2.3 Railway offices & address for correspondence: The List of addresses to which correspondence and documents relating to the contract should be sent, shall be given in GCC Part- I, Regulations for Tenders and Contracts section, of the given tender document. 5.2.4 Scope of Work: Scope of work under the given tender shall be defined clearly in this clause. 5.2.5 Agreement: The Agreement with the successful tenderer(s) should normally be signed within 21 days after the issue of LOA, on accepted rates and conditions, in such form as the Railways may prescribe and lodge the same with the Railway together with the conditions of contract, specifications and schedule of prices referred to therein duly completed. 5.2.6 Force Majeure: If, at any time, during the continuance of the given contract, the performance, in whole or in part, by either party, of any obligation under the given Contract shall be prevented or delayed by reason of any war, hostility, acts of the public enemy, civil commotion, sabotage, fires, floods, earthquakes, explosions, epidemics, quarantine restrictions, strikes, lock-outs, any Statute, Statutory rules, regulations, orders or requisitions issued by any Government or any other authority competent to do so or acts of God (thereinafter referred to as "event") then, provided notice of the happening of any such event is given by either party to the other within twenty one days from the date of occurrence thereof neither party shall by reason of such event be entitled to terminate this contract nor shall either party have any claim for damages against the other in respect of such non-performance or delay in performance and the obligations under the contract shall be resumed as soon as practicable after such event has come to an end or ceased to exist provided further that if the performance in whole or part of any obligation under this contract is prevented or delayed by reason of any such event beyond a period as mutually agreed to by the Purchaser and the Contractor after any event or 60 days in absence of such an 121 Pramod P. Goel

Tenders, contracts and arbitration agreement whichever is more, either party may at its option terminate the contract, provided also that if the contract is so terminated under this clause, the Purchaser will at the time of such termination, take over from the Contractor, at prices as provided for in the contract, all erected equipment or equipments under erection as also all or any portion of unused, undamaged and acceptable equipments, whether in storage or in the course of manufacture, at Scheduled rates or at prices mutually agreed to, where Scheduled rates are not available. 5.2.7 Security Deposit: Paragraph 3.4.4, section-I, Clause D Second inhouse process third step of this book to be provided here. 5.2.8 Performance guarantee & its refund: Paragraph 3.4.5, section-I, Clause D Second in-house process third step of this book to be provided here. 5.2.9 Programme of the work: 5.2.9.1 The Contractor shall have necessary resources to execute the work so that the entire work is completed with in a period as mentioned in the Tender, from the date of issue of Letter of Acceptance. He shall also have necessary resources to take up the works at, at least two stations simultaneously, within a period of 15 days beginning from the date of issue of priority of each station for taking up the work. Priority shall be as decided by the Railway and the contractor shall take up the work at the stations only as per the order of priorities assigned to the stations by the Railways for the purpose. 5.2.9.2 The contractor shall be held responsible for the execution of the works according to the time schedule given above for execution of the work in full compliance of the specifications and the various clauses of the supplement Technical specifications, instructions and drawing . Failure to comply with any of these will be dealt with as per provision laid down in the General Conditions of the contract of the Engineering Department of the Zonal Railways on whose jurisdiction the work falls and the Instructions for Tenderers. 5.2.9.3 The contractor on his part will have to employ labour in full strength commensurate with working area available. He will also arrange matching materials and equipments to complete the job most expeditiously so as to ensure that the work is completed in phases within stipulated period. 5.2.9.4 The contractor should nominate a competent Supervisor/Engineer in accordance with the provision contained in accordance with the provisions contained in clause 5.2.35 of these Special Conditions of Contract, as his representative, on the works who will be authorized to receive and acknowledge materials issued by the Railway and take all orders issued by the Inspecting Officer of the Railway. 5.2.9.5 Inspection Register shall be maintained at the site of work by the Railway wherein instructions regarding the working etcetera shall be recorded by the Engineer or his executive subordinates. It is expected of the contractor or his representative at the site to note such instructions whenever asked upon to do so and take action accordingly. 122

5.2.9.6 No facility whatsoever e.g. provision of approach road and provision of temporary level crossing etcetera will be provided by Railway for carting materials. Approach roads within the railway limits can be used for carting materials. 5.2.9.7 Technically it is considered that the work of cable laying should not be tackled under moist conditions. Hence the work of cable laying should be stopped before the onset of monsoon and the contractor shall have this in his mind while submitting his detailed time schedule. 5.2.10 Determination of Contract owing to default of contractor: Paragraph 4.6.1of this book to be provided here. 5.2.11 Contractors liabilities for costs and damages withholding and lien in respect of sums claimed: 5.2.11.1 Whenever any claim or claims for payment of a sum of money arises out of or under the contractor against the contractor, the purchaser shall be entitled to withhold and also have lien to retain such sum or sums in whole or in part from the security, if any, deposited by the contractor and for the purpose aforesaid the purchaser shall be entitled to withhold the cash security deposit or the security, if any furnished as the case may be and also have lien over the sum pending finalization or adjudication of any such claim. In the event of the security being insufficient to cover the claimed amount or amounts or if no security has been taken from the contractor, the purchaser shall be entitled to withhold and have lien to retain to the event of such claim amount or amounts referred to supra1 from any sum or sums found payable or which at any time thereafter may become payable to the contractor under the same contract or any other Department of the Central Government pending finalization or adjudication of any such claims. It is an agreed terms of the contract that the sum or sums of money so withheld or retained under the lien referred to by the purchaser till the claim arising out of or under the contract is determined by the Arbitrator (if the contract is governed by the Arbitration clause) or by the competent court as the case may be and that the contractor will have no claim for interest or damages whatsoever on any account in respect of such withholding or retention under the lien referred to supra duly notified as such to the contractor. For the purpose of this clause, where contractor is a partnership firm or a limited company, the purchaser shall be entitled to withhold and also have a lien to retain towards such claimed amount or amounts in whole or in part from any sum found payable to any partner/ limited company, as the case may be, whether in his individual company or otherwise. 5.2.11.2 Lien in respect of other contracts: Any sum or sum of money due and payable to the Contractor (including the Security Deposit returnable to him) under the contract may be withheld or retained by way of lien by the purchaser against any claim of this or any other Railways or any other departments of the Central Government in respect of payment of a sum of money arising out of or under this or any other Railway or any other department of the Central Government.
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signal used when a writer desires to refer a reader to an earlier-cited authority.

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Pramod P. Goel

Tenders, contracts and arbitration 5.2.11.3 Contractors liabilities for cost and damages: It is an agreed terms of the contract that sum of money so withheld or retained under this clause by the purchaser will be kept withheld or retained as such by the purchaser till the claim arising out of or under any other contract is either mutually settled or determined by the Arbitrator, if the other contract is governed by the Arbitration clause or by the competent court as the case may be, and that the contractor shall have no claim for interest or damages whatsoever on this account or any other grounds in respect of any sum of money withheld or retained under this clause and duly notified to the contractor. 5.2.12 Stores to be supplied by railway: 5.2.12.1 All materials to be supplied by the Railways to the contractor as listed below, will be supplied by Railway at Railway Stores Depot. The quantity required would be determined by the Railway according to the quantum of work to be done. The contractor shall be responsible for checking before taking delivery that all the materials given to him are in good conditions. The receipt of materials shall be acknowledged by the contractor or his representative, mentioning details of materials and their quantities on a prescribed performa. The left out/ unused materials if any shall be returned to Railway depot by the contractor for which no extra charges shall be paid by the Railway. List of material to be supplied by Railways to the contractor for execution of the work (presuming this contract being for the signalling work): i) Signalling cable of all sorts. ii) Relays of all sorts. 5.2.12.2 Recovery of cost in respect of excess unused Railway materials not returned by the contractor: In case where it is found after checking that excess quantity of Railway materials has been drawn by the contractor but the contractor fails to return any excess unused materials or there are any shortages during final reconciliation, their cost will be recovered by the Railway administration from the contractor at the book rate or last purchase rate or the prevailing market rate whichever is higher plus 5% on account of initial freight, 2% on account of incidental charges together with supervision charges at 12 % on the total cost inclusive of materials, freight and incidental charges. Freight between the Railway sources of supply and the site of work shall be to the contractors account. 5.2.13 No extra charges towards carriage etcetera: 5.2.13.1 No extra charges shall be paid to the contractor towards carriage, loading unloading and handling etcetera of the above materials indicated at preceding paragraph 5.2.12.1 required for execution of work and the rates quoted by the contractor against items included in different schedules, under which these materials are to be used shall be inclusive of all such charges. 5.2.13.2 The contractor shall be responsible for undertaking repair if any, to crates, cable drums, packing cases etcetera for safe transport of materials from Railways specified depot to the site of work. The contractor should also undertake necessary repairs to crates, drums etcetera in respect of unused 124

materials required to be returned to the purchaser. No extra payment will be made on this account. 5.2.14 Indemnity bond and standing bank guarantee against materials supplied to contractor: The contractor shall furnish a Standing Indemnity Bond on a given form for materials supplied to him by Railways under clause of Special Conditions of Contract. The Contractor shall also furnish a Standing Bank Guarantee as per given form (form to be designed and attached) for a sum of `25,000.00 only for materials supplied by Railways direct from the time he commences taking delivery of the materials to the time the materials are used in execution of work and quantities finally reconciled. 5.2.15 Place at which the material is to be issued by railway to the contractor: The stores shall be supplied by railways at its store depot at station earmarked. The contractor shall arrange to lead the materials received from Railway from the stores depot as specified, shall be transported up to the site of work at his own cost. 5.2.16 Insurance of material issued by Railway to the contractor for execution of the work: 5.2.16.1 The Contractor shall take out and keep in force a policy or policies of insurance against all liabilities of the contractor or the Railway at common law or under any statute in respect of accidents to persons who shall be employed by the contractor in or about the site or the contractors office for the purpose of carrying out the works on the site. The contractor shall also take out and keep in force a policy or policies of insurance against all recognized risks to their offices and depots. Such insurance shall in all respect be to the approval of the Railway Administration and if he so requires in his name. 5.2.16.2 The Contractor shall take out and keep in force a policy or policies of insurance for all materials handed over to him irrespective of whether used up in the portion of work already done or kept for the balance portion of the work until such works are handed over to the Railway. For this purpose, the works are deemed to have been handed over when Final Acceptance Certificate is issued by the Competent Authority after the completion of the entire acceptance test to be conducted on the works. 5.2.16.3 The contractor shall not be liable for losses/ damages to the materials either used up in the portion of work done or the materials kept for use at site, in consequence of mutiny or other similar causes over which the contractor has no control and which cannot be insured. Such losses or damages shall be the liability of the Railway. 5.2.16.4 The contractor should, however, insure the stores brought to site, against risks in consequence of war and invasion, as required under the Emergency Risk Insurance Act in force. 5.2.16.5 The contractor shall take out all insurance covers in connection with this contract with Government recognized Insurance Companies. 125 Pramod P. Goel

Tenders, contracts and arbitration 5.2.16.6 The Insurance policy taken as above should make Railway a beneficiary of the policy or the policy should be hypothecated in favour of Railway. In case contractor fails by delaying the timely payment of premium, Railway will have the right to get the policy renewed at contractors cost plus 20% of the premium amount per annum. 5.2.17 Stores, measuring instruments and other tools and plants for execution of work to be supplied by contractor: All materials other than those specifically mentioned to be supplied by Railway under paragraph 5.2.12 of these Special Conditions of Contract, shall be supplied by contractor at site. The supply of materials by the contractor will be according to what have been mentioned in each item of work schedules read with associated specifications and also other than those mentioned in the list of the materials to be supplied by Railway, for complete execution and commissioning of work. 5.2.18 Financial Advances admissible to the contractor: Provisions under paragraph 4.1.2 to 4.1.4 of this book to be placed here. Access to the work site: 5.2.19.1 Access to the site for the purpose of this contract shall be accorded to the Contractor by the Purchaser at all times. In the execution of the work no person other than the Contractor or his duly appointed representative or approved sub-contractor and bonafide workmen shall have access to the site. Access to the site of work at all times shall be allowed by the Contractor to officials or approved representatives of the Purchaser or to Railway staff for purpose of maintenance. 5.2.19.2 The Purchaser or his authorised representative shall have the right to refuse admission to the work site of any person employed by the Contractor whom the Purchaser or his Engineer may consider undesirable. 5.2.19.3 The Purchaser or his Engineer shall be at liberty to object to the employment of any person as Contractor's Agent/ Representative, approved Subcontractor's supervisors, workmen or labourer for execution of this contract on the ground of misconduct, incompetence or negligence. The Contractor on receipt of notice of such objection in writing from the Purchaser or his Engineer shall forthwith remove the person so objected to and provide in his place any other competent person and shall not allow the persons so objected to, to enter the site of work subsequently or remain in the execution of the contract. The Purchaser will not be liable to pay any cost or damage on this account.
5.2.19

5.2.20 Site clearance at the end of work: At the end of the work in each section the contractor shall, as a part of his contractual obligation, leave the area completely cleared of rubbish and obstructions of all kinds according to the instructions of the Railways representative. Besides he shall take all necessary steps in the course of the execution of work to avoid the presence of loose earth and ballast on platforms, in drains, on the track formation and pathways in the vicinity. If within a fortnight of completion of the particular item of site work, the 126

refuge is not cleared, the Railway will arrange to get them removed at the cost of the Contractor. However, before the Railway actually gets the site cleared, intimation in writing shall be sent to the contractor. 5.2.21 Guarantee/ Maintenance: 5.2.21.1 The contractor shall guarantee satisfactory working of the equipment supplied (and not required to be installed) by him in respect of each station for a period of 18 months beginning from the date of receipt of last supply. Similarly, the contractor shall guarantee satisfactory working of the equipment supplied and installed by him for a period of 12 calendar months beginning from the date of issue of completion certificate. 5.2.21.2 During this period, the Contractor shall keep all the equipment, materials and tools readily available and shall carry out at his own expense all modifications, additions or substitutions that may be considered necessary for the satisfactory working of the equipment supplied of work executed. Final decision in respect of unsatisfactory working of the equipment/ work executed or faulty use of designs workmanship etcetera shall rest with the Engineer-incharge, and the same shall be binding on the contractor. 5.2.21.3 During the aforesaid period of guarantee, the contractor shall be liable at his own cost for all repairs or replacement of any parts that may be found defective in the contract or equipment, irrespective of whether any defect arose as a result of faulty design, materials, workmanship, installation or otherwise provided that such defective parts which are not repairable at site, are promptly removed to the contractors works for repairs if required by him, and such defective parts should be replaced by him by new ones in order to remove the defects at his own expenses. In case minor repairs are carried out by the railway at site, the cost of such repairs plus departmental charges shall be borne by the Contractor. 5.2.22 Use of railway land: Use of Railway land required by Contractor for construction temporary office, quarters, hutments etcetera for the staff and for storing materials etcetera will be permitted to him/them free by Railway if available. The location of these office hutments, stores etcetera will be subject to the approval of the Engineer or his representative. The land will be restored to Railway by the Contractor in the same condition as when taken over or in vacant condition as desired by the Engineer, after completion of the work or at any earlier day as specified by the Engineer. The failure to do so will make the contractor liable to pay the cost incurred by the Railway for getting possession of land. 5.2.23 Use of electricity: The electricity will be supplied to the contractor, on his request, on usual charges, under the rules, by the Zonal Railway. However, the contractor shall have to make his own distribution system for the work. 5.2.24 Water charges: The Contractor shall make his own arrangement for potable and other water supply required for the execution of the work as well as 127 Pramod P. Goel

Tenders, contracts and arbitration for his labour. However, if water is supplied by the Railway, contractor will have to pay water charges as laid down in the General Conditions of Contract and in addition the Contractor will have to pay charges as levied by the corporation/ municipality. 5.2.25 Variation in Scheduled Quantity: Provisions of paragraph 4.3 of this book to be placed here. 5.2.26 Final acceptance: Final acceptance of the work shall be defined in the tender conditions, sampled as hereafter: 5.2.26.1 The final acceptance of the entire equipment installed on the Group shall take effect from the date of expiry of the period of guarantee, of the expiry of the last of the respective periods of guarantee of various sections for which provisional Acceptance Certificates are issued or brought into commercial operation, provided in any case that the Contractor has complied fully with his obligations in respect of each section of the Group, provided also that the attention has been paid by way of maintenance by the Contractor. 5.2.26.2 If on the other hand the contractor has not so complied with his obligation in respect of any section, the Purchaser may either extend the period of guarantee in respect of that section until the necessary works are carried out by the Contractor or carry out those works or being them carried out suo-motu on behalf of the Contractor at the Contractors expense. After expiry of the period of guarantee for each section, a certificate of final acceptance for the section shall be issued by the Purchaser and the last of such certificate will be called the last and final acceptance certificate. The contract shall not be considered as completed until the issue of final acceptance certificate by the Purchaser. 5.2.26.3 The Purchaser shall not be liable to the Contractor for any matter arising out of or in connection with the contract or execution of the work unless the Contractor shall have made a claim in writing in respect thereof before the issue of final acceptance certificate under this clause. 5.2.26.4 Notwithstanding the issue of final acceptance certificate the Contractor and the Purchaser (subject to sub-clause as above) shall remain liable for fulfilment of any obligation incurred under the provision of the contract prior to the issue of final acceptance certificate which remains unperformed at the time such certificate is issued and for determining the nature and extent of such obligation the contract shall be deemed to remain in force between the parties hereto. 5.2.27 Measurement: Provisions under paragraph 4.2 of this book to be placed here. 5.2.28 Payment: Contactor shall be entitled for stage payments also called as on-account payments i.e. with the progress of work at stages, in case of schedule based work, and at milestones in case of turnkey projects, as provided in the contract conditions. 5.2.28.1 On-account payment: Subject to any deductions or recovery which the Railway may be entitled to make under contract, the contractor will be entitled to 128

be paid from time to time by way of on-account payment only for such works as in the opinion of the Engineer he has executed in terms of contract. i) Separate bill for item/ sub item: on-account payment shall be made separately for each item/ Sub item of work given in the schedule of works. The bill shall be submitted by the contractor for each station/ milestone. ii) On-account payment for supply of items: 85% cost of supply items as given in work schedule shall be made on receipt of materials at contractors depot at the rates quoted in schedule for respective items. The contractor shall furnish a Bank guarantee for 15% of the amount claimed and insurance policy equal to the amount claimed for the material as per accepted rates in schedule along with Invoices. The Bank Guarantee shall be in the prescribed form of State Bank of India or from any Scheduled Bank/ Nationalized Bank and valid for two months beyond the date of commissioning of work at the station, item wise for which materials has been supplied. In the event of extension to the time of completion, the contractor shall extend the validity of the Bank guarantee and Insurance Policy. In the case the contractor is unable to furnish the Bank Guarantee, equivalent cash would be held by the purchaser from the payment due to the contractor. All Invoices shall be accompanied by the following: a) Suppliers challans. b) Inspection certificate granted by the RDSO/RITES. c) Certificate of receipt of materials at contractors depot duly accepted by purchasers in charge of works. iii) In case completion of works (Supply & erection) is held-up on Railways account and date of completion is extended on Railways account exclusively, on-account payment can be made to the extent of 85% of the cost of materials (supply portion in Schedule of rates) for the items as given in (tender document to be specified) on production of 15% B.G. of amount claimed and production of Insurance policy of equal amount claimed on this account on the same terms & conditions as of preceding paragraph. 95% payment for items supplied under schedule A (I) and A(II) of Vol.I shall be made on execution, erection, and installation of associate items of works included in schedule A-I and A-II of Vol.-I based on measurement of executed quantity, less payment already made as onaccount payment. On-account payment for installation portion of works including supply items not covered in preceding paragraph. On completion of each item of work in schedule at each station the contractor shall be paid to the extent of 95% price for supply & erection 129 Pramod P. Goel

iv)

vi)

Tenders, contracts and arbitration as included in Schedule, less recovery of on-account payment made under clause. (Payments for certain items as linked to completion of different work schedules may be restricted to lesser percentage such as 60% or like, till the work is completed in totality). vii) Payment not to exceed 95%of total payment due: The on-account payment shall not exceed 95% of the total on-account payment due to the contractor on the rates indicated in the Schedule. For this purpose, the payment to the contractor at each on-account stage shall be restricted to 95% of the amount calculated on the basis of rates indicated in the Schedule. On-Account payment for supply of materials shall be covered by standing Indemnity Bond on a format approved by the railway. Certificate to be given with submission of bills: All bills shall be submitted to the nominated authority. The supplier /Contractor should insert the following clause in the bills: We certify that no additional duty set offs on the goods supplied by us have accrued under the MODVAT scheme in force on the date of supply, after we submitted our quotations and submitted the present bills. In the event of MODVAT credit being extended by the Government of India to more items than already covered, the firm should advise the purchaser about the additional benefits accrued, through a letter containing the following certificate or any variation thereof as may be considered necessary by individual Railway administration. We hereby declare that we can avail additional duty set offs as per latest MODVAT scheme in force now and we hereby give a reduction of --------------per unit and agree to revise the prices indicated in the order. The current ED of ------------- is payable on this reduced price. Therefore, we request you to amend the order accordingly. 5.2.28.2 Final payment: On the basis of completion certificate issued by the Competent Authority for all the works in all the sections covered in this contract, the final bill for the balance payment for each item/sub item of work shall be submitted by the contractor along with a clear No Claim Certificate. The completion certificate shall be issued by the Competent Authority only when he has accepted the work wholly after conducting the acceptance tests on each item of work and the final payment shall be released after ensuring that the validity of Bank Guarantee against Performance Guarantee covers guarantee/ maintenance period as prescribed in these Special Conditions of Contract. The Competent Authority shall normally be the authority who is competent to sign the contract. If 130

this Competent Authority is of the rank lower than JA Grade, then a JA Grade officer (concerned with the work) shall be the Competent Authority. 5.2.29 Site clearance: At the end of the work in each section the contractor shall, as a part of his contractual obligation, leave the area completely cleared of rubbish and obstructions of all kinds according to the instructions of the Railways representative. Besides he shall take all necessary steps in the course of the execution of work to avoid the presence of loose earth and ballast on platforms, in drains, on the track formation and pathways in the vicinity. If within a fortnight of completion of the particular item of site work, the refuge is not cleared, the Railway will arrange to get them removed at the cost of the Contractor. However, before the Railway actually gets the site cleared, intimation in writing shall be sent to the contractor. 5.2.30 Components and materials received for work: The Contractor shall utilise all equipments, components or materials, procured specifically for the purpose of execution of the work, in the work or other requirements. Any surplus materials left over at the end of the work shall not be disposed off without prior approval of the Purchaser in writing. The Purchaser may within a period of six months from the date of provisional Acceptance of the last section, switching/Booster station notify the Contractor of the Purchaser's interest in any or all of the surplus materials and shall have the right to take over the materials at Schedule prices. The materials so notified by the Purchaser shall be taken over by the Purchaser and paid for in full. The Contractor may use in any manner deemed fit, only such surplus materials which are not covered by the Purchaser's notification after getting the approval of the Purchaser in writing. 5.2.31 Arbitration; Demand for Arbitration; Place of arbitration; Appointment of arbitral tribunal & arbitral award: Provisions of arbitration clause 64 of GCC as given under Annexure-VII, placed amongst last pages of this book to be placed here. 5.2.32 Right of railway to keep back from the contract any portion of work: The successful Tenderer will however, have no claim/ right in the execution of any work which in opinion of the Engineer should be carried out departmentally or otherwise and the Railway reserves the right any time the acceptance of the tender to keep back from the contract and carry out the work or any portion of work through any other agency it may think without assigning any reason. No claim for compensation/ loss or whatsoever on this account, from the contractor, will be entertained by the Railway. 5.2.33 Recovery for delay in completion: If the Contractor fails to execute and complete the work within the time specified in the Agreement or within the period of extension granted except, in so far as the delay is on the Purchaser's account, the contractor shall accept reduction in the total amount payable to him by the Purchaser up to the maximum rate of `4,000/- per day for the actual delay 131 Pramod P. Goel

Tenders, contracts and arbitration occasioned beyond the appointed time by which the work shall have been completed under the contract. Such reduction shall be accepted by the Purchaser in full satisfaction of the Contractor's liability arising from delay only. This recovery for delay in completion will be applicable separately for each stage of completion of overhead equipment, switching stations or booster transformer stations when two or more stages of completion are specified in the contract. The General Manager or his successor shall, at his sole discretion, specify a time limit within which the unfinished portion of the work shall be completed after serving on contractor a notice of the Purchasers intention to effect the said recovery. In the event of failure of the Contractor, the Purchaser shall be at liberty to take action in accordance with provisions of contract conditions. 5.2.34 Price Variation: Contrary to the variation in quantities resulting in variation in the cost of work, the contract Price Variation is related to and based on market fluctuations. In view of increase or decrease in cost of labour and material with passage of time, the contracts which are awarded, incorporate provision for price variation as the contract is awarded on the cost prevalent at the time of award without catering for unknown factor of market price fluctuations. Accordingly the price variation may be positive as well as negative. A price variation clause pertaining to GCC 17 is directed by the Railway Board to be included in Special Conditions of Contract so that the tenderers are fully aware of the implications of the price variation clause and take the same into account while quoting their rates. The contract agreements shall clearly indicate that the price variation implies both increase as well as decrease in input prices and therefore, price variation during the currency of the contract may result in extra payment or recovery, as the case may be. 5.2.34.1 Applicability of price variation: (Railway Boards circular number 80/WI/CT/10 dated 23rd April, 1980, incorporating amendments up to Railway Boards circular 2007/CE.I/CT/18 dated 28.9.2007). i) Price variation clause will not apply if the price variation is up to 5%. Re-imbursement/recovery due to variation in prices shall be made only for the amount is excess of 5% of the amount payable to the contractor, as hitherto. Price variation clause will however, not apply to zonal contracts. The price variation clause may be applicable and shall be incorporated in tenders valuing for `One crore and above only, irrespective of completion period. No maximum value for the price variation is prescribed. The fixed cost of the contract value on which no price variation would be permissible may be kept at 15% of the value of the contract, however the aforesaid ceiling of 15% will however be applicable whatever may be the actual period of the execution of the contract. 132

ii) iii)

iv) v)

vi)

vii)

The total amount of reimbursement /recovery due to variation in prices of the several components of the amount finally payable to the contractor subject to material supplied free by Railway to the contractor will fall outside the purview of Price variation clause. Price variation during extended period of contract: Price Variation is payable/ recoverable during the extended period of the contract also, provided the Price Variation Clause was part of the original contract and the extension has been granted on administrative ground, under provisions of General Conditions Contract, Clause 17-A, delay on administrative account. Further, the total amount payable/recoverable would be restricted to the ceilings, as applicable for the original completion period, provided in the contract agreement (Railway Boards circular number 85/WI/CT/7 Pt., dated 25.10.2002). However, where extension of time has been granted due to delay on account of contractors failure i.e. under the General Conditions Contract Clause 17B, price adjustment will be done as follow: a) In case the indices increase above the indices applicable to the last month of original completion period or the extended period, under Clause 17-A of the GCC, the price adjustment for the period of extension granted under clause 17 (B) i.e. extension of time for delay due to contractor, will be limited to the amount payable as per the indices applicable to the last month of the original completion period or the extended period under Clause 17-A of GCC of the General conditions of contract, as the case may be. b) In case the indices fall below the indices applicable to the last month of the original/extended period of completion under Clause 17-A of GCC, as the case may be, then the lower indices will be adopted for price adjustment for the period of extension under clause 17 (B) of the General Conditions of Contact.

viii)

ix)

x)

xi)

The price variation should be based on the average price index of 3 months of the quarter instead of the price index of the first month of the quarter under consideration. The demands for escalation of the cost may be allowed on the basis of provisional indices made available by the Reserve Bank of India. Any adjustment needed to be done based on the finally published indices is to be made as and when they become available. Before calling for tenders, the approval of an Officer not below the rank of SA Grade should be obtained who will satisfy himself about all the pre-requisites required for calling tenders having been fulfilled. He will particularly look into the reasonableness of the period provided for the completion of the work. The percentage components of various items like material, labour, fuel etcetera will be different for different types of works. These percentages for various types of works are given in ensuing paragraphs. Depending 133 Pramod P. Goel

Tenders, contracts and arbitration upon the type of the work these percentages should be incorporated in the price variation clause before including the same in the tender documents. If the rates quoted in negotiated tender are accepted, it is logical that the base month for Price Variation Clause is the month in which negotiations are held. This, however, is required to be clarified in the tender conditions or in negotiations (Railway Boards circular number 80/WI/CT/ 10, dated 16.3.1988). The contract agreements should clearly indicate that price variation implies both increase as well as decrease in input prices and therefore, price variation during the currency of the contract may result in extra payment or recovery, as the case may be. The rates quoted by tenderer and accepted by Railway Administration shall hold good till the completion of the work and no additional individual claim will be admissible on account of fluctuation in market rates, increase in taxes/any other levies/tolls etcetera except that payment/ recovery for over all market situation shall be made as per price variation clause given in ensuing paragraph. The index number for the base period will be the Index number as obtained for the month of opening of the tender and the quarters will commence from the month of opening of tender. The adjustment for variation in prices if required shall be made once every quarter in the on-account payment. If more than one on-account payment is made to the contractor in a quarter, the adjustment, if required, shall be made in each bill. No cognizance will be given for any sort of fluctuations in taxes and other market conditions etcetera for any individual item for the purpose of making adjustments in payments. The contract shall, however, be governed by the General Price Variation clause. If, in any case, the accepted offer includes some specific payment to be made to consultants or some materials supplied by Railway at fixed rate, such payments should be excluded from the gross value of the work for purpose of payment/recovery of price variations i.e. material supplied free by the Railway to the contractors will not form part of the value of the contract entered into and will fall outside the purview of the price variation clause.

xii)

xiii)

xiv)

xv)

xvi)

xvii)

xviii)

5.2.34.2 Adjustment for variation in prices: Adjustment for variation in prices of materials, labour, fuel, explosives, detonators shall be determined in the manner prescribed hereafter: The percentage for material, labour, fuel, explosive, detonators and fixed components of contract related to earth work contract, ballast and quarry products, tunnelling, track renewal work and other works in which the price variation shall be admissible is given in ensuing paragraph 5.2.34.3. 134

The amount of variation in price in the several components (labours, material etcetera) shall be worked out by the following formulae: (i) (ii) (iii) (iv) (v) L = Rx(I-Io)/Io X P/100; M = Rx(W-Wo)/Wo X Q/100; U = Rx(F-Fo)/Fo X Z/100; X = Rx(E-Eo)/Eo X S/100; N = Rx(D-Do)/Do X T/100; where L denotes amount of variation in labour. where M denotes amount of variation in materials. where U denotes amount of variation in fuel. where X denotes amount of variation in explosives. where N denotes amount of variation in detonators. Price Price Price Price Price

R denotes gross value of the work done as per on-account bill(s), excluding cost of materials supplied by Railway at fixed price. This will also exclude specific payment, if any, to be made to the consultants engaged by the contractors (such payment will be indicated in the contractors offer). Io Consumer price Index Number for Industrial workers- All IndiaPublished in R.B.I. Bulletin for base period. I Consumer price Index Number for Industrial workers- All IndiaPublished in R.B.I. Bulletin for the average price index of the 3 months of the quarter, under consideration. Wo- Index number of whole sale price-By Groups and sub-groups, All commodities, as published in the R.B.I., Bulletin for the base period. W- Index number of wholesale prices-By groups and Sub-groups- All commodities- as published in the R.B.I. Bulletin for the average price index of the 3 months of the quarter under consideration. Fo- Index number of wholesale prices- By groups and sub-groups for fuel, power light and lubricants as published in the R.B.I. Bulletin for the base period. FIndex number of wholesale prices- By groups and Sub-groups for fuel, power, light and lubricants as published in the R.B.I. Bulletin for the average price index of the 3 months of the quarter under consideration. Eo- Cost of explosives as fixed by DGS & D in the relevant rate contract of the firm from whom purchase of ex[plosives are made by the contractor for the base period. ECost explosives as fixed by DGS&D in the relevant rate contract of the firm from whom purchases of explosives are made by the contractor for the average price index of the 3 months of the quarter under consideration.

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Tenders, contracts and arbitration DoCost of detonators as fixed by DGS&D in the relevant rate contract of the firm from whom purchase of detonators are made by the contractor for the base period. Cost of detonators as fixed by DGS&D in the relevant rate contract of the firm from whom purchases of detonators are made by the contractor for the average price index of the 3 months of the quarter under consideration. % % % % % of labour component. of material component. of fuel component. of explosive component. of detonators component.

D-

P Q Z S T

5.2.34.3 Percentage of labour components, material components, fuel components, in various types of works: A) Earthwork Contracts: Labour component Fuel component Other material component Fixed component 50% 20% 15% 15%*

B)

Ballast and Quarry Products Contracts: Labour component 55% Fuel component 15% Other material component 15% Fixed component 15%* Tunnelling Contracts: Labour component Fuel component Explosive component Detonators components Other material component Fixed component 45% 15% 15% 5% 5% 15%*

C)

D)

Track renewal works (Railway Boards circular number 2003/CEI/CT/18, dated 17.12.2003): Labour component 50% Fuel component 12.5% 12.5% Other Material component Fixed component 25%*

*Will not be considered for any price variation. E) Other Works Contracts: Consequent to steel & cement price hike (Railway Boards letter number 85/WI/CT/7/Pt. I, dated 18/19.4.2006): 136

a) b)

c)

The weightage would be applied on the value arrived at after deducting the cost of Steel & Cement from the total contract value. The tender schedule should have separate items for Supply of Steel and Supply of Cement for RCC/PSC work to know the cost of steel and cement actually consumed at any given point of time. Prices of Steel and Cement are to be linked with the Wholesale Price Index of the respective subgroups as per RBI Index Numbers. The formula for calculating the amount of variation on account of variation in prices of Steel and Cement is as indicated hereafter: Ms = Mc = R x (Ws-Wso)/Wso R x (Wc-Wco)/Wco

Where: Ms = Amount of price variation in material (Steel) Mc = Amount of price variation in material (Cement). R = Value of Steel or Cement supplied by Contractor as per onaccount bill in the quarter under consideration. WSO = Index number of Wholesale Price of subgroup (of Steel and Iron) as published in RBI Bulletin for the base period. Ws = Index number of Wholesale Price of subgroup (of Steel and Iron) as published in RBI Bulletin for the first month of the quarter under consideration. Wco = Index number of Wholesale Price of sub-group (of Cement) as published in RBI Bulletin for the base period. Wc = Index number of wholesale price of subgroup (of cement) as published in RBI bulletin for the first month of the quarter under consideration. e) Percentage of different components of other works contracts: Labour component Material component Fuel component Fixed component 30% ( no change) 25% 15% ( no change) 30%*

*Will not be considered for any price variation. Since, it is not possible to legislate the above percentage for every type of work, Chief Engineer/Chief Engineer (Construction), may vary these percentages in consultation with FA & CAO & CAO (Construction) keeping in view the special features and complexities of the work involved. It should, however, be born in mind that whatever percentages are to be adopted they should first be decided and indicated in the price variation clause to be included the special tenders Conditions before floating the tender so that the tenderer are fully aware of them while quoting their rates. 137 Pramod P. Goel

Tenders, contracts and arbitration 5.2.35 i) Engineering Organization: The Tenderer shall make an assessment of the requirement of personnel for execution of this project & shall give details as to how he proposes to mobilize all technical manpower required for the project. Details of the qualifications & experience of the personnel identified for project execution shall be included in the Tender. The Tenderer shall submit, the list of personnel (Engineers, Supervisors, Artisans etcetera) employed by him with their names, qualifications, bio-data & experience in this particular trade of work under consideration, organisation available on hand and proposed to be engaged for subject work along with the Tender positively. Irrevocable letters of commitment of the said supervisors & key technicians/ artisans for doing the work shall be furnished along with tender papers if they are not already in employment of the Tenderer. The Tenderer shall have at least one Graduate Engineer and two experienced Supervisors (Diploma holders) having minimum 5 years experience in the relevant field supported by at least 5 numbers of artisan staff like signal fitter, wiremen, etcetera. The staff mentioned above in the Engineering Organization should be available on regular basis for the entire duration of the work. Additional staff shall be deputed as per requirement & progress of the work. *****

ii)

138

CHAPTER-VI
ARBITRATION AND CONCILIATION 6.0 Disputes, Arbitration Act, arbitration panel and process of arbitration: Not satisfied with the decisions conveyed against the disputes and claims raised by the contractor and the arbitration requested by him, the Arbitrator or the panel of arbitrators is appointed by the organisation concerned. However in case of railway, the arbitrator or the panel of arbitrators is appointed by the sole arbitrator which is the General Manger, after review by the Chief Engineer and the Law officer, referring the claims raised by the contractor, except the Excepted Matters. A copy of the letter appointing the Arbitrator or the Arbitral Panel is endorsing to the contractor concerned advising him to contact the Arbitrator or the Arbitration Tribunal as the case may be. If all the claims fall within the purview of the excepted matters, there shall be no claims to be referred to the Arbitrator or Arbitration Panel accordingly no appointment of the arbitrator or the Arbitral Panel shall be there. 6.1 Disputes & claims: A dispute and the Claim with financial implications may arise, out of or in connection with the contract, whether during the progress of the work or after completion and whether before or after the determination of the contract & the contractor shall be entitled for a remedy. The disputes on contracts shall be dealt with under Settlement of Disputes- Indian Railway Arbitration Rules, in integral part of GCC. Clause 63 of the GCC, Matters finally determined by the railway reads as: All disputes and differences of any kind whatsoever arising out of or in connection with the contract, whether during the progress of the work or after its completion and whether before or after the determination of the contract, shall be referred by the contractor to the General Manager and the General Manager shall within 120 days after receipt of the contractors representation make and notify decision on all matters referred to by the contractor in writing provided that matters for which provision has been made in clauses 8, 18, 22(5), 39, 43(2), 45(a), 55, 55-A(5), 57, 57-A, 61(1), 61(2) and 62(i) to (xiii) (B) of the General Conditions of Contract or in any clause of Special Conditions of the Contract shall be deemed as excepted matters (matters not arbitrable) and decisions of the Railway authority, thereon shall be final and binding on the contractor; provided further that excepted matters shall stand specifically excluded from the purview of the arbitration clause [Railway Boards circular number 2003/CE-I/CT/4, dated 9.10.2003]. 6.1.1 Excepted Matters: While General Conditions of Contract cover vital issues stipulated by Railway Board, Special Conditions of Contract (SCC) are specific to the contract in question, covering almost all features related to the given contract. Clauses as mentioned in GCC and all clauses of the SCC cover 139 Pramod P. Goel

Tenders, contracts and arbitration provision for all possible disputes that might arise. Accordingly only those matters shall be required to be referred to for Arbitration which are not covered under the conditions provided in GCC & SCC. As such matters which are covered by these clauses are not to be referred for arbitration, and the matters except those covered under given clauses of the GCC and all clauses of the SCC, may only be referred for arbitration. The matters not to be referred for arbitration are termed as excepted matters. 6.2 Arbitration Act & Arbitration: Arbitration is a quasi-judicial system of solving a dispute between two parties governed by Arbitration Act, current being Arbitration and Conciliation Act 1996 [Act 26 of 1996]. A copy of the bare act is placed as annexure- VIII amongst the last pages of this book. The single Arbitrator or the panel of the arbitrators is called Arbitral Tribunal [Chapter-I, section 2, subsection (d) of Arbitration Act]. The arbitral tribunal shall always be of odd numbers. Judge, Arbitrator, Arbiter, Referee and Umpire are the persons who make decisions that determine or settle points at issue. A judge is one capable of making rational, dispassionate, and wise decisions: In this case, the jury members are the judges of the truth; An arbitrator is either appointed or derives authority from the consent of the disputants; An arbiter is one whose opinion or judgment is recognized as being unassailable or binding: The critic considered himself an arbiter of fine literature; referee is an attorney appointed by a court to investigate and report on a case and an umpire is a person appointed to settle an issue that arbitrators are unable to resolve. In sports referee and umpire refer to officials who enforce the rules and settle points at issue. 6.3 Arbitration agreement & appointment of Arbitration Tribunal: As the matters of dispute and the claims thereupon, raised by the contractor, are decided by the Railways and communicated the decisions within 120 days, from the date of receipt of such claims by the railways, to the contractor, under clause 63 of GCC, the Contractor after 120 days but within 180 days after presenting his final claims on disputed matters shall demand in writing that the dispute or difference be referred to arbitration [GCC 64 (1) (i); Annexure VII placed amongst last pages of the book]. As and when a request is made by the contractor for appointment of an arbitrator and the Railway agrees for appointment of the Arbitrator it becomes an Arbitration Agreement [section 7, chapter-II of Arbitration Act 1916]. 6.3.1 Appointment of Arbitration tribunal: Appointment of arbitrators is covered under section 11, chapter-III of Arbitration Act 1996, however under Railway organisation the General Manager is the sole Arbiter/Arbitrator, who may arbitrate by himself or appoint an Arbitration Tribunal of one impartial Arbitrator or a panel of more than one impartial arbitrators, which might include 140

either a Chairman or an umpire also, depending upon the amount claimed by the party seeking arbitration, out of the arbitrators placed on the panel of the railway concerned. The persons are placed on the panel of Arbitrators after ensuring their impeccable integrity. In case of formation of a panel, one of the arbitrators shall be from Accounts branch of the Railways and one shall be as chosen by the claimant out of the names of three persons, from the list of Arbitrators suggested by the General Manager. The third person obviously is the one, having adequate knowledge of the subject of arbitration, chosen by the Railways. Usually the panel is limited to three arbitrators. A railway officer sitting to arbitrate is a quasi judicial authority for the period he is working as an arbitrator; accordingly he is not questionable for the arbitral award delivered by him which is binding on both parties. However in case of a corrupt practice, the Arbitrator is liable to be prosecuted under the law, against which no one is immune. In case when the aggrieved contractor approaches directly to the court of law for appointment of arbitrator and the court of law appoints the arbitration tribunal out of the panel of arbitrators born by the concerned railway or out of any of the advocates, the railway may chose to defend itself in favour of tender conditions laid down procedure for appointment of arbitral tribunal by the sole arbitrator which is the General Manager. There have been incidences where the court of law did not accede to the request and the arbitral tribunal appointed by the court of law, performed the job so allotted to him by the court. It is pertinent to note that in some cases classification of the claims as excepted matters is in grey area, as such, in such case where there is unclear boundary in classifying a claim as excepted matter, it should be left for the arbitrator to arbitrate upon the claim in question. It is in the interest of purchaser/Railways to appoint the Arbitral Tribunal at first stage itself without creating conditions for the claimant to seek remedy form court of law to avoid loss of money and time for both the parties. 6.3.2 Commencement of Arbitral proceedings: Arbitral proceedings commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent [Section 21chapter- V, of the Arbitration Act 1996 and clause 64(1) (ii)(a) of GCC]. However the Arbitral proceedings commence physically form the date of appointment of the Arbitral Tribunal and the period for completion of proceedings and issue of arbitration award is limited by the order appointing arbitrator tribunal. 6.3.3 Cost of Arbitration process: The Arbitral Tribunal shall fix its amount of deposit or supplementary deposit, as the case may be, in advance for the costs expected to be incurred, in equal amount by both the parties. In case one of the 141 Pramod P. Goel

Tenders, contracts and arbitration partys is not able to pay the advance, the other party may deposit the first partys share also and in case this not being so, the arbitrators shall terminate arbitral proceedings and refund the amount balance with the tribunal to the party/ parties concerned [Section 38, chapter X, of the Arbitration Act 1996]. However railways fixes the amount to be drawn by the members of the tribunal as their fees, which along with other expenses such as stenographers charges, stationery, stamp paper for issue of award and other miscellaneous expenses, is deposited by both the parties in the manner given under the Act. 6.3.4 Place of arbitration: The place of arbitration can be decided mutually by the parties and in case of dispute, the Arbitral Tribunal shall decide the place for arbitration based upon the requirements such as hearing the witnesses, experts opinion or for inspection of documents, in consultation with members [Section 20, Chapter- V, of the Arbitration Act 1996]. However the standard place chosen for arbitration by railway officials working as arbitrators is the office chamber of the single arbitrator and that of the office chamber of any of the members of the panel with consensus within. 6.3.5 Conduct of the tribunal members and decision making: The Arbitral Tribunal members shall not only be impartial but shall act impartial also and give equal treatment to both the parties and offer equal opportunity to each party to present its case [Section 18, chapter V, of the Arbitration Act 1996]. 6.3.5.1 Conduct of the tribunal members from railways: It needs high moral strength for the arbitrators to be impartial with specific reference to Railway Officials, not to be overtaken by the phobia of i) the vigilance and ii) indulgence of watching railways interests, and often landing up in a situation of defending railways as well as themselves (of vigilance) thereby loosing the factor of impartiality and loosing the confidence of the claimant. In such cases the claimant if not satisfied shall have to go for appeal in court of law forfeiting the basic purpose of arbitration as well as creating high order of dissatisfaction, loss of time and loss of money. 6.3.6 Decision making by the tribunal members: As and when the tribunal consists of more than one member, the decision shall be taken by majority vote or if authorised by the parties or all the members of the tribunal the question of procedure shall be decided by the presiding arbitrator [Section 29, chapter VI, of the Arbitration Act 1996]. 6.4 Process of arbitration: As and when an aggrieved contractor, not satisfied by the reply received from the Railway, which is tender accepting authority, on all or part of his disputes, raised by him, he shall furnish his disputes/claims requesting the General Manager for appointment of an Arbitrator or Arbitral panel except those claims which stand redressed to his satisfaction.

142

The claimant, while submitting his claims, i) shall put facts in support of each claim, ii) along with the financial implication of each claim separately and iii) the remedy sought in clearly, within the period stipulated by the tribunal. The claim document shall be supported with associated documents which would be instrumental in substantiating the claims. Unless agreed by parties, either party may amend or supplement his claims, unless the arbitrator considers it inappropriate to allow the amendment or supplement of the claims [Section 23, chapter V, of the Arbitration Act 1996]. In case of railways, the General Manager shall appoint the Arbitral Tribunal referring the claims preferred by the claimant except the excepted matters [within 60 days of receipt of request]. The Tribunal shall be that of one Arbitrator or a panel of Arbitrators depending upon the amount claimed by the contractor, endorsing a copy of the appointment letter to the claimant. The Arbitral panel shall ask the claimant to submit his claims in writing, [within 30 days from the date of appointment of arbitral tribunal {GCC 64(1)(ii)(a)} however if the contractor does not prefer his final claim within 90 days of receiving the intimation from the Railways that their/his final bill is ready for payment they/he will be deemed to have waived his/their claims and Railway shall be discharged and released of all liabilities under the contract in respect of these claims {GCC 64(1)(iv)}]. At this juncture, the claimant is free to refer all the claims referred to the General Manager, with the request for appointment of the Arbitral Tribunal. The claimant shall endorse a copy of the claims so preferred by him to the respondents. The tribunal shall call for a rejoinder to the claims preferred by the claimant from the respondents. Copy of GCC 64 is placed at Annexure-VII amongst last pages of this book. The respondents shall submit their rejoinder to the claims, unto the tribunal, as submitted by the claimant, endorsing a copy to the claimant. The tribunal shall fix a date for hearing both the parties. It is imperative on the part of each party to endorse a copy of the correspondence addressed to the tribunal to the other party and vice-versa [Section 24, chapter-V, of the Arbitration Act 1996]. 6.4.1 Hearing and proceedings: Even though the arbitration is carried out not in an atmosphere similar to court and the Tribunal shall not be bound by the Code of Civil Procedure, 1908 (V of 1908) or the Indian evidence Act, 1872 (1 of 1872), it is usually carried out in the premises of the official concerned/working as the arbitrator. The parties are free to agree on procedure to be followed and in case of disagreement the Tribunal shall be empowered to decide the proceedings in the manner it considers appropriate as well as the about the proceedings to be hearing and written [Section 19 & 24, chapter V, of the Arbitration Act 1996].

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Tenders, contracts and arbitration The Code of Civil procedure is the laid down procedure for conduction of business of court of law. The aggrieved party is represented by the contractor himself or through authorised representative supported by advocate to look into legal matters also while the railway is represented by an officer at an appropriate level, supported by an Advocate and a senior advocate depending upon the stakes and implications involved. Under normal circumstances it is not necessary for either party to appoint advocate but for the gravity of the case it is always safe to obtain support of an advocate to avoid loss on legal count. In case the issue of deciding the jurisdiction of the tribunal is raised by any of the parties, the arbitral tribunal holds competence to rule its own jurisdiction [Section 16, chapter IV, of the Arbitration Act 1996]. This implies that in case the claimants raise claims which were categorised as excepted matters and insist upon the tribunal to hear them also, it is left for the tribunal to decide either way. Under such circumstances the tribunal shall be obliged to examine if the claims were genuinely categorised as excepted matters or not and in case such claims turn out to be not covered as excepted matters the tribunal may rule so and decide on such claims about their validity. However in case the tribunal decides the claims to be covered as excepted matters as categorised by the purchaser/railways, the tribunal shall not hear onto such matters. The claimants shall be asked to present their case which may be done by the claimant or his advocate, based upon the written claims submitted by them earlier. The respondents may keep taking notes for counter arguments and shall submit their view point agreeing or countering the claimants deliberations, in consistency to the rejoinder submitted by them or in view of some new issues having grown during the arguments. The tribunal shall issue an order sheet at the conclusion of each hearing, with i) brief of the proceedings held on the given date of the hearing and the ii) directives to both the parties for submission of rejoinder if needed, with any document or evidence required, before the date of next hearing and iii) fix the date for next hearing. In case a nontechnical person is appointed as arbitrator, which may be the case when the court appoints the arbitrator, and certain such issues arise during the process, a decision on which can not be taken without understanding the intricacies, the tribunal may appoint an expert to seek his help in arriving at the fair opinion. However such situation is not likely to arise when the tribunal is constituted by railway technical people [Section 26, chapter V, of the Arbitration Act 1996]. 6.4.2 Failure of any party in cooperating & repercussions thereof: In case the claimant fails to communicate his statement of claims, the tribunal shall 144

terminate the proceedings. However the tribunal shall continue the proceedings treating the absence of the respondents as admission of allegations. The tribunal may continue proceedings in case of nonappearance or non-submission of written evidence by a party, and make arbitral award based upon whatever evidence is available to the tribunal [Section 25, chapter V, of the Arbitration Act 1996]. 6.5 Arbitral award & termination of proceedings: To avoid a situation when any or both the parties may represent that they were not heard completely and thus not given full opportunity to present their case, both the parties are asked to put on record that they were heard and had nothing more to say. The tribunal members shall sit together to discuss the final out come and then the award is drafted by any of the member or the umpire and then signed by all the tribunal members. In case of single arbitrator entire job shall be done by him. The award is printed on stamp paper of amount prescribed with respect to amount awarded and associated regulations of the state of the country where the award is to be released. 6.5.1 Arbitral award contents and the format: The Arbitral award shall be in conformity to the provisions under section 31 of Chapter-VI, of the Arbitration Act 1996 with salient features as explained hereafter: i) Award shall be made in writing and shall be signed by the members of the arbitral tribunal, however in case of more than one member in the tribunal the signatures of majority of the members shall be enough if the reason for omission is stated; ii) The arbitral award shall state the reasons on which the award is based unless the settlement has taken place or the parties have agreed that no reasons may be given. iii) The arbitral award shall state its date and the place of arbitration as determined in accordance with section 20 of Chapter-V, of the Arbitration Act 1996 and the award shall be deemed to have been made at that place. iv) After the arbitral award is made, a signed copy shall be delivered to each party. v) The arbitral tribunal may, at any time during the arbitral proceedings, make an interim arbitral award on any matter with respect to which it may make a final arbitral award. vi) (a) Unless otherwise agreed by the parties, where and in so far as an arbitral award is for the payment of money, the arbitral tribunal may include in the sum for which the award is made, interest at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made. (b) A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of eighteen per centum per annum from the date of the award to the date of payment. 145 Pramod P. Goel

Tenders, contracts and arbitration vii) Unless otherwise agreed by the parties, (a) The costs of an arbitration shall be fixed by the arbitral tribunal, (b) The arbitral tribunal shall specify (i) The party entitled to costs, (ii) The party who shall pay the costs, (iii) The amount of costs or method of determining that amount, and (iv) The manner in which the costs shall be paid.

Note: For the purpose of clause (a), "costs" means reasonable costs relating to: (i) The fees of the arbitrators and witnesses, (ii) Legal fees and expenses, (iii) Any administration fees of the institution supervising the arbitration, and, (iv) Any other expenses incurred in connection with the arbitral proceedings and the arbitral award. 6.5.1.1 A party may apply for corrections of any computational errors, any typographical or clerical errors or any other error of similar nature occurring in the award of tribunal, within 60 days of the receipt of the award. 6.5.1.2 A party may apply to tribunal within 60 days of the receipt of award to make an additional award as to claims presented in the arbitral proceedings but omitted from the arbitral award. 6.5.2 Termination of arbitral proceedings: With the release of the award arbitral proceeding stand terminated. The arbitral proceedings may also be terminated when i) the claimant withdraws his claim unless the tribunal considers it pertinent for final settlement, ii) parties agree for termination of the proceedings, iii) the tribunal finds continuation of proceedings as unnecessary or impossible [Section 32, Chapter-VI, of the Arbitration Act 1996]. 6.5.3 Settlement: A provision for settlement of disputes between the parties for which arbitrator may use mediation, conciliation or other procedure to reach the parties at a settlement between them. If the parties reach to settlement, the arbitrator may terminate the proceedings and make an award based on the agreed terms. However such award based on the settlement between the parties shall have the same status and effect as any other arbitral award [Section 30, ChapterVI, of the Arbitration Act 1996]. 6.5.4 Finality of the arbitral award: The arbitral award shall be final and binding on both the parties and persons claiming under them respectively [Section 35, Chapter-VIII, of the Arbitration Act 1996]. 6.5.5 Enforcement: As the award is released by the tribunal, the Chief Engineer shall scrutinise the award with reference to financial implications and examine any technical flaw detected during proceedings of the arbitration which may need to be redressed for future corrections. The copy of the same shall be submitted to the Associated Law officer of the railway, with the comments of the Chief Engineer for review of the legal aspects with a view that shall it be 146

appropriate to accept the award or go for appeal against it keeping in view the strength of the case on the face of it, looking at financial and other technical implications as the award if tantamount to undesirable losses to the railway because of inadequate follow up of the case or any other technical flaw detected during the proceedings of the arbitration and then shall be forwarded to the associated Financial Advisor and Chief Accounts Officer (FA&CAO). The complete case shall be submitted to the General Manager for acceptance of the observations of the Chief Engineer, FA&CAO and Law officer. The Tribunal, while concluding its award, shall impose a time limit for implementation of the award with rider that in case of delay, an interest shall be payable to the claimant at the given rate on the total amount awarded, for the period between the date stipulated and date of actual disbursement of the award keeping margin enough for either of the parties to go in for appeal for setting aside of the award. The award shall be enforced before the date of accrual of the interest or otherwise it is decided to go in for an appeal. 6.6 Application for setting aside Arbitral Award: Aggrieved by the award, the remedy of either party shall be by application for setting aside such award in accordance with the subsections (2), (3) and (4) of Section 34, chapterVII of the Arbitration Act 1996. These subsections read as: Subsections 2, 3 and 4: 2) An arbitral award may be set aside by the Court only, if: (a) The party making the application furnishes proof that: (i) A party was under some incapacity, or (ii) The arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or (iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or (iv) The arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matter beyond the scope of the submission to arbitration: Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or (v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or 147 Pramod P. Goel

Tenders, contracts and arbitration (b) The Court finds that: (i) The subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or (ii) The arbitral award is in conflict with the public policy of India. Explanation: Without prejudice to the generality of sub-clause (ii), it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81. 3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal: provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter. Action on receipt of application by the court: 4) On receipt of an application under sub-section (1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award. 6.6.1 Limitations: However, when the time for making an application to set aside the arbitral under section 43, Limitations, Chapter-X of the Arbitration Act 1996, has expired or such application has been made, it has been refused, the award shall be enforced under the code of Civil procedure 1908 (V of 1908) in the same manner as if it were a decree of the court [Section 36, chapter-VIII of the Arbitration Act 1996]. 6.7 Some real life cases: The cases quoted under the following paragraph cover only the relevant major part of the case: 6.7.1 Case-1: The case pertaining to Engineering department of Central Organisation, Railway Electrification, Allahabad, the contractor was required to erect buildings for feeding posts etcetera besides other jobs he was also required to lift railway foot-over bridges across the platforms under running train conditions, for purpose of electrification of traction of the given area. The claim was for an amount more than ten lakh and a panel of three JA grade officers was setup out of which one member was from finance and other two were from S&T and one from another technical branch. Major issues were: 148

(1)

(2)

Site for building was not given for which the contractor had procured building material viz. cement and bricks. Ultimately the site could not be finalised and the work could not be taken up. The contractor claimed for cost of the material which was not handed over to the railway and was declared by the contractor as lost. The raising of foot-over bridges was delayed and the contractor had to arrange men and material repeatedly for each bridge. The raising required arranging of traffic blocks so that cribs could be fixed for raising the bridge, by the side of the track. The blocks were to be arranged by railways. The contractor was asked to make arrangements for raising the bridge, in anticipation of traffic block which did not materialise and the contractor had to keep men and material in anticipation of impending traffic block.

Claim 1: During hearing, although it was established that the material was arranged by the contractor for the building but the contractor could not give a satisfactory reason for either not handing over the material so procured by him to the railways or keeping it secured by deployment of security or using this material in some other contract. It worked out that he had abandoned the material to be conveniently stolen away. This could not be appreciated by the tribunal and no compensation was awarded against this claim. Claim 2: railway argued that since there was no provision in the contract for payment for waiting, no payment against such claim was admissible to the claimant. Although the contractor was supposed to quote covering for such eventuality but it was not possible to imagine the number of such occasions, the rates were invariably adjudged for single instance. As such the argument of contractor was considered to be acceptable and complete amount as claimed by him was awarded in his favour. On issue of Arbitration award, the case was put up to the General Manager for acceptance and directives so that further action could be taken. The then General Manager not only did not appreciate the award but called the Finance member of the tribunal who was a lady and intimidated her to the extent that she broke down. He ordered for lodging appeal in the High Court against the award. However, the claimant also went for appeal against the award, concurrently. This must be the one of the solitary case where both the parties were aggrieved by the award, on different issues. 6.7.2 Case- 2: The contractor was awarded a prestigious work of introducing latest signalling system on Patna- Gaya section, by Railway Electrification, Allahabad. The system was to be inaugurated by Honble President of India on a given deadline. While the work was in progress, the signalling cable stacked on the Nadaul station platform was burnt by PWG group. FIR was lodged by the contractor as 149 Pramod P. Goel

Tenders, contracts and arbitration well as by Railways. The material was completely insured railway being beneficiary. Railways raised the compensation onto the Insurance Company. The survey was carried out by the representative of Insurance Company who submitted report to the company that the prevention was not within the capacity of the contractor. However the Insurance Company refused to compensate on the plea that the incidence was covered under the uninsurable clause. Railway deducted the cost of the cable through contractors running bill and was not prepared to consider any plea of the contractor. On request of the contractor for Arbitration, an Arbitral Tribunal consisting of three Junior Administrative grade officers from Electrical, Finance and GMs Secretariat was appointed by the General Manager, as total claims worked out to be around `23.5 lakh for all claims including the claim for the cost of cable reimbursement. However the claims refereed for arbitration were for the amount of `6.5 lakh, withholding rest of the claims having been covered under excepted matters. After a lapse of a few days the building of the same station was blown off by the PWG group, an FIR for the same was also lodged by the Station Master. There was a clause in Special Conditions of Contract (SCC) which was in two parts (a) & (b). Part (a) read that the contractor shall safe guard the railway property given to him for execution of the work as well as he shall take insurance with railways as beneficiary for such material while the part (b) was that in case the loss as it happened was beyond the capacity of the contractor, the contractor shall not be liable for the same. This clause was different than and in addition to Force Majeure clause. There was another clause through which the contractor had to indemnify against losses for all such material issued to him for execution of the work. The contactor requested the tribunal to hear all the claims under the tribunals powers to decide their own jurisdiction, failing which they were not inclined to proceed further. The Arbitral tribunal agreed to hear all the claims as preferred by the contractor. During the hearing on the cable loss issue, as against railways view of matter being covered under clause (a) of SCC, the contractor pleaded that the subject matter was covered under the clause (b) of SCC and not (a) since i) the Insurance Company was a Government of India Undertaking, ii) The surveyor had observed that the loss was beyond the control of the contractor, iii) the same station building was blown off by the PWG group within a short period of burning of the cable and that iv) the railway itself being government of India organisation had asked the insurance company for release of the compensation money which was denied by the Insurance company on the grounds that the loss under the given circumstances was not insurable. The tribunal kept the award on hold for more than two years and released on directives of Honble court, for `50 thousand, against the claims not covered under the excepted matters. The contractor has gone for appeal in high court. 150

Normally an arbitration award must be given within 4 months from the date of first hearing. However for claims exceeding `50 lakh, a period up to one year may be permitted [paragraph number 5 of Railway Boards circular number95/CEI/CT/24 dated: 14.11.96]. 6.7.3 Case- 3: Contract for carrying out signalling work in part of the area covered under Ranchi Project of Central Organisation Railway Electrification infested with criminals was awarded to the contractor. Signalling cable with copper conductors was railway supply. As the cable was laid by the contractor, the same was cut and pulled out from under the earth. It became almost impossible to maintain continuity of the cable rendering entire cable so laid and stolen in parts, as lost. The cost of the cable as well as amount paid for laying of the cable was recovered from the contractors on-account bills making the contractor hard-pressed. Contractor appealed to the railways requesting for release of the payments so deducted through his running bills. On getting negative reply he requested for appointment of arbitral tribunal which could not by accepted as all the claims turned out to be within the ambit of excepted matters. The contractor approached Honble High Court of Allahabad for appointment of arbitral tribunal. Honble High Court of Allahabad appointed a senior advocate practicing in the high court as arbitrator. The proceedings continued for around one year. Arguments were given by the contractor on the same lines as that of preceding case under paragraph 6.7.2 of this book. The tribunal awarded the amount against the cost of the cable and the cost of laying of the cable rejecting the frivolous claims. The award was accepted by the railway as well as by the contractor. 6.7.4 Comparison of these cases: In first case under paragraph 6.7.1 of this book, the arbitral tribunal had been judicious to the extent that the contractor did not get what he expected at the same time railway considered the amount awarded to the contractor was more than what he deserved. In the second case under paragraph 6.7.2 of this book there seemed to be no obvious reason for holding the award for two years or more which could be released on command of the Honble High court. The award can be considered as defying all the arguments during proceedings and was released under bias being pressurised by the Honble High court. In the last & third case under paragraph 6.7.3 of this book, the award can be considered as most judicious being acceptable to both the parties. 6.8 Arbitration and conciliation Act 1996: Part II, Enforcement of certain foreign awards: Arbitration Act Part II deals with i) New York convention award and ii) Geneva Convention award.

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Tenders, contracts and arbitration 6.8.1 New York convention awards: Under the New York convention awards, Foreign Award means an arbitral award on differences between persons arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India, made on or after the 11 th day of October, 1960: (a) in pursuance of an agreement in writing for arbitration to which the Convention set forth in the First Schedule applies, and (b) in one of such territories as the Central Government, being satisfied that reciprocal provisions have been made may, by notification in the Official Gazette, declare to be territories to which the said Convention applies. Any foreign award which would be enforceable under this Chapter [Part II, Chapter-I of Arbitration Act 1996] shall be treated as binding for all purposes on the persons as between whom it was made, and may accordingly be relied on by any of those persons by way of defence, set off or otherwise in any legal proceedings in India and any references in this Chapter to enforcing a foreign award shall be construed as including references to relying on an award. 6.8.2 Geneva Convention awards: Under the Geneva convention awards, Foreign award means an arbitral award on differences relating to matters considered as commercial under the law in force in India made after the 28 th July, 1924, (a) In pursuance of an agreement for arbitration to which the Protocol set forth in the Second Schedule applies, and (b) between persons of whom one is subject to the jurisdiction of some one of such powers as the Central Government, being satisfied that reciprocal provisions have been made, may, by notification in the Official Gazette, declare to be parties to the Convention set forth in the Third Schedule, and of whom the other is subject to the jurisdiction of some other of the Powers aforesaid, and (c) in one of such territories as the Central Government, being
satisfied that reciprocal provisions have been made, may, by like notification, declare to be territories to which the said Convention applies, and for the purposes of this Chapter an award shall not be deemed to be final if any proceedings for the purpose of contesting the validity of the award are pending in the country in which it was made.

6.8.2.1 Enforcement of foreign awards: Where the Court is satisfied that the foreign award is enforceable under this Chapter, the award shall be deemed to be a decree of the Court. [Part II, Chapter-II, clause 58 of Arbitration Act 1996]. 6.9 Arbitration and conciliation Act 1996, Part III; Conciliation: Conciliation is a process of bringing the parties to an amicable solution by way of discussing to which the conciliator mediates. There shall be one Conciliator agreed by both the parities however there may be two or three Conciliators as may be agreed by each party. The term Conciliator shall apply to sole or two or three conciliators. Conciliator shall conduct the proceedings in a manner he considers appropriate guided by the principles of objectivity, fairness and justice. He shall invite parties 152

to meet him or may communicate with them orally or in writing. He may meet with them together or separately with each of them maintaining privacy of each party. As and when it appears to the conciliator that a settlement of disputes which may be acceptable to both the parties, he may formulate a possible settlement and submit the same to both the parties for their observation. He shall draw terms of settlement o receipt of the observations of both the parties. If agreed by both the parties on settlement of disputes they may draw up or may request the Conciliator to draw up the settlement Agreement and sign. The settlement agreement when signed by both the parties shall be binding on both, which shall be authenticated by the Conciliator and handed over to each of the parties. With this the Conciliation proceedings shall stand terminated except for the conditions as mentioned in section 76 of Arbitration & conciliation Act 1996. The Conciliator shall be entitled for the costs to be shared by both the parties [section 78 & 79 of Arbitration & conciliation Act 1996]. The Settlement agreement shall have same status as that of an Arbitral Award under section 30 of the Arbitration and Conciliation Act 1996. 6.10 Arbitration and conciliation Act 1996, Part IV; Supplementary provisions: This part deals with power of high court to make rules, removal of difficulties, power to make rules, repeal of savings, repeal of ordinance 27 of 1996 and saving and convention on the recognition and enforcement of foreign awards under sections 53 and 54 of this act. This part being not in the scope of this book is not discussed although the statutory part is available under the Act placed amongst last pages of this book under Annexure -VIII, for the benefit of those, interested. *****

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Tenders, contracts and arbitration

CHAPTER-VII
CONTRACTS & VIGILANCE 7.0 Canons of financial proprietary: In terms of paragraph 116 of Finance Code Volume-I, Canons of financial proprietary provide that: 1 The expenditure should not prima-facie be more than the occasion demands and that every government servant should exercise the same vigilance in respect of expenditure incurred from public money as a person of ordinary prudence would exercise in respect of expenditure of his own money. No authority should exercise its powers of sanctioning expenditure to pass an order which will be directly or indirectly to its own advantage. Public money should not be utilized for the benefit of a particular person or section of community unless: i) The amount of expenditure involved is insignificant; or ii) A claim for amount could be enforced in a court of law; or iii) The expenditure is in pursuance of a recognised policy or custom.

2 3

It is pertinent to note accordingly to be in consonance with the Canons of financial proprietary, one should invariably go in for a product or services which shall perform best with a longer life and works out to be economical and beneficial to the railways. 7.1 What and is Why of vigilance: A small shopkeeper keeps an accountant to maintain his records. The accountant also keeps a watch on any irregularity with an intention to find if some money is being swindled out without the knowledge of the owner of the shop. This takes larger dimension in larger business organisations which employ Chartered Accountants for better accountancy. The pilferages happen and are traced and action on the employees is taken suitably by the Company. The volume of financial transactions and the employees of Government of India is many fold higher as compared to the largest company and as such government deals with financial matters through Comptroller and Auditor General of India and Administrative matters through different organisations which employ personnel such as Indian Railways, Indian Postal services, Department of Telecommunication, Government owned Public Sector Units etcetera. With the huge increase in infrastructural activities involving larger financial implications and rampant financial misappropriation, the government got concerned. Mukesh Ambani, Reliance Industry chief, in one of the speeches delivered in Chennai said that the entire business of our country is based on mistrust and misbelieve. It is apparently true as there already has been plethora of rules and 154

regulations transferred by the British Government, who never trusted Indians while ruling the country and the legacy followed with the takeover of the country back by Indian hands which was already not working but for the cruel whip. The organization, Transparency International has placed India on 85th position (Times of India, Lucknow edition of 19th September, 2010, Interview with E. Sreedharan, MD, DMRC), further revised upwards to 87th position (NDTV news on 27th October2010, amongst top corrupt countries. Great philosopher Confucius said that: those who trust others are betrayed less than those who do not. However we continue disbelieving our men and the corruption continues growing necessitating installation of Central Vigilance Commission to monitor men involved with financial impropriety. 7.1.1 Corruption: The word corrupt (Middle English, from Latin corruptus, past participle of corrumpere, to destroy: com-, intensive pref. and rumpere, to break) when used as an adjective literally means "utterly broken". In modern English usage of the words corruption and corrupt have many meanings, used in different contexts such as corruption of i) Humans & their Values, ii) Systems and iii) material. The other meanings of corruption, as derived from different dictionaries on line are: 7.1.2 Corruption of Humans & values: Merriam Webster dictionary, Defines word corrupt as i) to change from good to bad in morals, ii) bad manners or actions and also to Bribe, iii) to degrade with unsound principles or moral values, iv) to rot or spoil, v) to alter from the original or correct form or version. It also defines the word as intransitive verb i) to become tainted or rotten, ii) to become morally debased, and iii) to cause disintegration or ruin. Word corruption is also defined by the same dictionary as i) guilty of dishonest practices, as bribery; lacking integrity; crooked, ii) debased in character; depraved; perverted; wicked; evil: a corrupt society, iii) made inferior by errors or alterations, as a text, iv) infected; tainted, v) decayed; putrid. The intention of the author here is to apprise the reader of the scope which is covered by the words corrupt & corruption and their associated meanings, without going into detailed explanations, as well as to evaluate destruction of human self with the human values, which one shall bear when indulged with corruption, whether detected by any of the monitoring agency, or not. 7.1.3 Corruption of systems and material: Systems include politics, judiciary, data, software, linguistic, and material include putrefaction of dead bodies, infected, tainted, decayed rotting fruits, vegetables, milk or any such thing which becomes not eatable or usable. However Corruption of systems and material, being out of context and not within the scope of this book is not discussed further. 155 Pramod P. Goel

Tenders, contracts and arbitration Accordingly, tangible or un-tangible personal gains out of ones position or circumstances empowering to black mail are corrupt practices. Few of the prominent examples are, taking or giving bribe, misuse of ones powers and position gaining personal advantage or advantage to any other person, misuse of employees services for personal benefit working under the employers control, favour to any person related or not, unfaithfulness to the employer, etcetera. 7.1.4 Agencies monitoring corruption over world: Agencies named as Transparency International; Global Witness, Group of States Against Corruption (French: Groupe d'Etats contre la Corruption), a body established under the Council of Europe to monitor the implementation of instruments adopted by member states to combat political corruption; Independent Commission Against Corruption (disambiguation); Anti-Corruption Trust of Southern Africa (ACTSouthern Africa) and Central Vigilance Commission to monitor Central Government employees of India, monitor corruption within their capacities. 7.2 Vigilance commission1: Government of India under discomfort with leakages of already scarce money available, desperate to curb corruption, setup Vigilance Commission on 11th February 1964, as an apex body with an objective of exercising general superintendence and control over Vigilance Administration, set up on the recommendations of the Committee on Prevention of Corruption, popularly known as the Santhanam Committee. Its establishment was considered essential for evolving and applying common standards in deciding cases involving lack of probity and integrity in Administration. It has been conceived as the apex Vigilance institution, free of control from any executive authority, monitoring all vigilance activity under the Central Government and advising various authorities in Central Government Organizations in planning, executing, reviewing and reforming their vigilance work. 7.2.1 Organisation of Vigilance Commission: The Central Vigilance Commission has its own Secretariat, Chief Technical Examiners' Wing (CTE) and a wing of Commissioners for Departmental Inquiries (CDI).[CVC website] 7.2.1.1 Secretariat of Vigilance Commission: The Secretariat consists of a Secretary of the rank of Additional Secretary to the Government of India (GOI), one officer of the rank of Joint Secretary to the GOI, ten officers of the rank of Director/Deputy Secretary, four Under Secretaries and office staff. 7.2.1.2 Chief Technical Examiners' Wing (CTE): The Chief Technical Examiner's Organisation constitutes the technical wing of the Central Vigilance Commission (India) and is manned by two Engineers of the rank of Chief Engineers (designated as Chief Technical Examiners) with supporting engineering staff. The main functions assigned to this organisation are: i) Technical audit of construction works of Governmental organisations from a vigilance angle; --------------------------------------------------------------------------------------------------1

Web site, Railway Board, Vigilance Directorate, Vigilance Manual, Chapter-II CVC.

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ii)

Investigation of specific cases of complaints relating to construction works; iii) Extension of assistance to CBI in their investigations involving technical matters and for evaluation of properties in Delhi; and Tendering of advice/assistance to the Commission and Chief Vigilance Officers in vigilance cases involving technical matters. 7.2.1.3 Commissioners for Departmental Inquiries (CDIs): There are fifteen posts of Commissioners for Departmental Inquiries (CDI) in the Commission, 14 in the rank of Deputy Secretaries/Directors and one in the rank of Joint Secretary to Government of India. The CDIs function as Inquiry Officers to conduct Oral inquiries in departmental proceeding initiated against public servants. 7.2.2 Railway Board: Central Government Organisations have its own setup to monitor and keep the organisation free of misconduct concerned with financial corruption. Railway, one such organisation is represented by the Executive Director Railway Board who is responsible to CVC through CRB. Refer Indian Railway, Government of India, Ministry of Railways, Railway Board, Vigilance Directorate, Vigilance manual- 2006, Chapter-II; Central Vigilance Commission (CVC), placed as annexure IX, amongst lat pages of this book. 7.2.3 Each Zonal Railway: also has one such organisation under the General Manager, headed by Senior Deputy General Manager of the railway. 7.3 The cause and the procedure of vigilance: Major causes of concern of the vigilance are i) procedural mistake causing financial loss to the government, such as overstepping ones powers, disregard to rules, codes, circulars etcetera, ii) callousness, and iii) malafide intentions causing loss to government or not. 7.3.1 Procedural mistakes: The person dealing with the public money can not afford to be casual. Even an unintentional overlooking of the rules and circulars updated up to the last minute of taking decisions if ignored whether causing loss or not may turn to be troublesome as the investigating authority is most likely to find some motive or loss to the public exchequer. There shall be no remedy later except ones fragrance [see paragraph 7.7.2 of this book]. 7.3.1.1 Overstepping powers: Powers are delegated to the officials at different levels of hierarchy. Every individual working in his capacity has to be well versed with the powers vested with him at his level of hierarchy and shall not sit on tender committee, pass an order on a matter or take any other decision beyond powers vested with him. Such an act of taking any action knowingly or unknowingly, if carried out is termed as overstepping of powers and is not acceptable with impunity. Example: Once, while one junior scale officer was carrying out the test check on measurements done by his subordinate in the measurement book, with the 157 Pramod P. Goel

Tenders, contracts and arbitration contractor proprietor accompanying, a 50mm Saal wood plank was found provided to bear a battery charger in the cabin, instead of 25 mm thick teak wood plank as per contract specifications. The officer did not accept this plank as provided and asked for replacement with a teakwood plank. The contractor pleaded that the present Saal wood plank was of cost double then that of teakwood plank what the officer was asking of. He was told that even if a plank 50mm thick made of gold was provided, it would not be acceptable to him as specifications in the contact called for 25mm thick teak wood plank. The plank was replaced and then only the test check was done. The officer did not overstep to change the specifications. Moral of example is: i) Take up the job fully prepared. ii) Never buckle under pressure. iii) Do your job as assigned and dont believe on hearsay. 7.3.2 Callousness causing loss of revenue to the government: One being a public servant has no authority to go out of way disregarding any rule, even if to benefited by any amount, similar to causing a loss of a single paisa out of any act, to the Government. Any such act shall be viewed with suspicion. 7.3.3 Malafide intentions causing loss to government or not: Malafide intentions can be defined as any action carried out which appears to have been initiated or executed with the intentions of obtaining some personal gains financial or any other, whether gained or not. 7.4 Government employees and the procedure of vigilance: As the loco pilot drives an engine by switching it on he is not relieved of his responsibilities, other than driving the loco, as he is to be vigilant against a red signal, any obstruction on the track, the temporary and permanent speed restrictions, animals trespassing the track endangering the entire train behind him, performance of the loco he is driving and many more factors, to reach the destination safely, while the Loco is moving on as controlled by the loco pilot. So is the case with the government machinery, as while the system of Governance is working it is also watching the health of the system itself through its own other system of viglance. The other system within, the vigilance organisation i) carries out routine checks, ii) investigate complaints against individuals or group, iii) takes Audit inspection reports for checking any procedural mistakes or other wise intentional misappropriation. However, for practical reasons, the Commission presently advises only on vigilance cases of Group A officers in Central Government, All India Service Officers, and other officers of public sector undertakings, autonomous organizations, local authorities, societies etcetera as notified by the Government (Indian Railway, Government of India, Ministry of Railways, Railway Board, 158

Vigilance Directorate, Vigilance manual- 2006, Chapter-II, clause 204; Central Vigilance Commission (CVC), placed as annexure IX, amongst lat pages of this book). 7.4.1 Routine Checks by vigilance organisation: regular routine test checks are carried out by the vigilance organisation of their own and investigated. In case of any foul play is visualised, detailed checks are carried out. 7.4.2 Complaints against an individual or the group of railway officer (s): A person aggrieved by the act of tender dealing authorities, due to non-award of the contract to him because of valid reasons or malafide considerations or asking for bribe or any other reason may lodge a complaint with the vigilance organisation at any level. The anonymous complaints may or may not be investigated. 7.4.3 Taking up of Audit inspection reports, draft paragraphs etcetera, by vigilance: The basic exercise to be carried out by the Audit organisation is to detect loss of revenue to the Government of India, due to act of omission or commission by an individual. Either case falls within the purview of the vigilance organisation also as such vigilance also picks up audit inspection reports, draft paragraphs or other work done by the Audit for procedural mistakes or other wise intentional misappropriation causing financial loss. Also see paragraph 209, Stages at which CVC is consulted in Gazetted cases, of Indian Railway, Vigilance Directorate, Vigilance Manual, Chapter-II, CVC placed as annexure IX, amongst last pages to this book. As and when vigilance organisation is convinced of loss of revenue due to any of the reasons, an enquiry is initiated against the person or group of persons considered of having involved. 7.5 Process of investigation: Any person whether involved with corrupt practices or not, never anticipates that he shall fall within the net of vigilance organisation. The smallest indication of a contemplated enquiry sends chills through the spine of the person concerned whether involved or not, resulting in irreparable damage to the body, disruption of family life through a chain reaction. It becomes extremely important for the organisation to be doubly sure that a person in grey area is taken up only when the investigations are indicative of being on positive side. Role of vigilance organisation is supervisory and disciplinary action against an individual can be initiated by the disciplinary authority only, under whom, the person concerned is working, under advice of the vigilance. The charges so framed by the disciplinary authority shall be with the consent of the vigilance. For details refer clause 209, Stages at which CVC is consulted in Gazetted cases of, Indian Railway, Government of India, Ministry of Railways, Railway Board, Vigilance Directorate, Vigilance manual- 2006, Chapter-II; Central Vigilance Commission (CVC), placed as Annexure-IX, amongst last pages of the book. 159 Pramod P. Goel

Tenders, contracts and arbitration 7.5.1 Enquiry: To start with the enquiry a list of questions is served upon each person in question, by the vigilance organisation, to be replied by the person or group of persons suspected to be involved intentionally or unintentionally, reply of which is asked. There is no way to postpone the reply. 7.5.2 Information to CVC: In case of a Group A officer such case is essentially informed to the vigilance commission. 7.5.3 Issue of charge sheet: Those who are established to have been involved in corrupt practice or otherwise causing financial loss to the exchequer, consequent upon the reply received on the list of questions, are served with the charge-sheet. The charge-sheet shall be framed depending upon grade of the punishment under Defence and Appeal Rules (DAR) i.e. major or minor penalty and signed by disciplinary authority depending upon the level of the person(s) in the hierarchy to whom the charge-sheet is to be served. 7.5.4 Minor penalty; reply and action: In case of the reply received against minor penalty charge-sheet, the disciplinary authority shall take decision on penalty to be imposed. 7.5.5 Major Penalty; reply and action: In case of the reply received against major penalty charge-sheet, an enquiry committee at level appropriate against the person concerned shall be setup. The enquiry report shall be put up to the disciplinary authority who shall take decision on penalty to be imposed. (Clause 210 of Indian Railway, Government of India, Ministry of Railways, Railway Board, Vigilance Directorate, Vigilance manual- 2006, Central Vigilance Commission (CVC) chapter-II placed as Annexure-IX, amongst last pages of the book). 7.5.6 Conviction not imminent if innocent: It is not essential that in each case where enquiry has been initiated, the person against whom the enquiry has been setup shall be convicted, if found innocent. 7.6 Some important features for the reply to be given in case of questions issued by vigilance or charge-sheet issued by the disciplinary authority: The only source of communication between the person involved and the vigilance organisation, is the written documents, although when in doubt, some times vigilance also interviews with person involved to ascertain or rule out the conviction during talk, associated with body language, as such it is very important to read the documents served upon the person involved, very carefully and reply to-the-point. Some tips are given in following paragraphs for those who may possibly otherwise land up in the administrative net while being innocent: 7.6.1 Read and understand the contents carefully: Read the charges very carefully between the lines. Read the question sheet or the charge-sheet 160

7.6.2

7.6.3

7.6.4 7.6.5 7.6.6

7.6.7

as the case may be, repeatedly until each and every word is thoroughly understood. Collect facts for the reply: Collect facts for the reply. Never depend upon memory or hunch. The person concerned is authorised to ask for official documents for study and taking notes. Do not shirk or hesitate. Ask for the documents in writing. Draft and take help of a friend for reply: Draft the reply. An intimate and reliable friend may also be consulted but always base upon ones own convictions even when modified with the discussion with a friend. Sincere and learned friends some times give good ideas when the person concerned is confused and disturbed. Reply in language most comfortable: Reply must be given in the language in which the person replying can express himself the best. Be your own self: Do not use legal language. Be your own self. Be brief and within the context: Reply content shall never go out of context. Be to-the-point within the ambit of list of questions or the charges. Never try to explain beyond the document received, especially which may open up new dimension to the issue in question. Be truthful: There is no substitute to an honest and truthful reply, which does not conflict with any of the facts at any stage.

7.7 Postulates to keep the vigilance at arms length distance: Postulates have no legal sanctity. These are based on the experience gathered by the author who has seen them working well. Accordingly one must know and remember that: 7.7.1 Nothing is secret: Deevaron ke bhi kaan hote hain i.e. whatever is said, done & thought is known to all and sundry sooner or later. 7.7.2 Fragrance: Every individual has a fragrance, pleasant or foul. 7.7.3 Polluted money breeds misfortune: Everyone loves his family and children; the family and children fed with polluted bread shall invariable be sick. 7.7.4 Greed the worst trait: Greed, out of all traits, is the worst trait of humans. Life is once and cannot be retraced. If one believes in the four postulates as given above, he will always: 7.7.5 7.7.6 7.7.7 7.7.8 7.7.9 7.7.10 Ensure his self respect and prestige of his family. Record what is in mind, without hesitation. Be above influence of malafide intentions. Be bold in his deeds. Trust your subordinates. Whatever may be the ordeal, nothing wrong shall ever happen to an honest person. ***** 161 Pramod P. Goel

Tenders, contracts and arbitration

ANNEXURE-I
The Constitution of India, Chapter- III: PROPERY, CONTRACTS, RIGHTS, LIABILITIES, OBLIGATION AND SUITS: CLAUSE: 299- Contracts: (1) All contracts made in the exercise of executive power of the Union or of a State shall be expressed to be made by the President, or by the Governor of the State, as the case may be, and all such contracts and all assurances of property made in the exercise of that power shall be executed on behalf of the President or the Governor by such persons and in such manner as he may direct or authorise. (2) Neither the President nor the Governor shall be personally liable in respect of any contract or assurance made or executed for the purposes of this Constitution, or for the purposes of any enactment relating to the Government of India heretofore in force, nor shall any person making or executing any such contract or assurance on behalf of any of them be personally liable in respect thereof. RAILWAY ACT 1989: CHAPTER MAINTENANCE OF WORKS: CLAUSE: 11 IV CONSTRUCTION AND

11. Power of railway administrations to execute all necessary works.Notwithstanding anything contained in any other law for the time being in force, but subject to the provisions of this Act and the provisions of any law for the acquisition of land for a public purpose or for companies, and subject also, in the case of a non-Government railway, to the provisions of any contract between the non-Government railway and the Central Government, a railway administration may, for the purposes of constructing or maintaining a railway- (a) make or construct in or upon, across, under or over any lands, or any streets, hills, valleys, roads, railway, tramways, or any rivers, canals, brooks, streams or other waters, or any drains, water-pipes, gas-pipes, oil-pipes, sewers, electric supply lines, or telegraph lines, such temporary or permanent inclined-planes, bridges, tunnels, culverts, embankments, aqua ducts, bridges, roads, lines of rail, ways, passages, conduits, drains, piers, cuttings and fences, in-take wells, tube wells, dams, river training and protection works as it thinks proper; b) alter the course of any rivers, brooks, streams or other water courses, for the purpose of constructing and maintaining tunnels, bridges, passages or other works over or under them and divert or alter either temporarily or permanently, the course of any rivers, brooks, streams or other water courses or any roads, streets or ways, or raise or sink the level thereof, in order to carry them more conveniently over or under or by the side of the railway; (c) make drains or conduits into, through or under any lands adjoining the railway for the purpose of conveying water from or to the railway; (d) erect and construct such houses, warehouses, offices and other buildings, and such yards, stations, wharves, engines, machinery apparatus and other works and 162

conveniences as the railway administration thinks proper; (e) alter, repair or discontinue such buildings, works and conveniences as aforesaid or any of them and substitute others in their stead; (f) erect, operate, maintain or repair any telegraph and telephone lines in connection with the working of the railway; (g) erect, operate, maintain or repair any electric traction equipment, power supply and distribution installation in connection with the working of the railway; and (h) do all other acts necessary for making, maintaining, altering or repairing and using the railway. 12. Power to alter the position of pipe, electric supply line, drain or sewer, etc.(1) A railway administration may, for the purpose of exercising the powers conferred on it by this Act, alter the position of any pipe for the supply of gas, water, oil or compressed air, or the position of any electric supply line, drain or sewer: Provided that before altering the position of any such pipe, electric supply line, drain or sewer, the railway administration shall give a notice indicating the time at which the work of such alteration shall commence, to the local authority or other person having control over the pipe, electric supply line, drain or sewer. (2) The railway administration shall execute the work referred to in sub-section (1) to the reasonable satisfaction of the local authority or the person receiving the notice under the proviso to sub- section (1). 13. Protection for Government property.- Nothing in sections 11 and 12 shall authorise- (a) a railway administration of the Government railway to do anything on or to any works, lands or buildings vested in, or in the possession of, a State Government without the consent of that Government; and (b) a railway administration of a non-Government railway to do anything on or to any works, lands or buildings vested in, or in the possession of, the Central Government or a State Government, without the consent of the Government concerned. 14. Temporary entry, upon land to remove obstruction, to repair or to prevent accident.(1) Where in the opinion of a railway administration- (a) there is imminent danger that any tree, post or structure may fall on the railway so as to obstruct the movement of rolling stock; or (b) any tree, post, structure or light obstructs the view of any signal provided for movement of rolling stock; or (c) any tree, post or structure obstructs any telephone or telegraph line maintained by it, it may take such steps as may be necessary to avert such danger or remove such obstruction and submit a report thereof to the Central Government in such manner and within such time as may be prescribed. (2) Where in the opinion of a railway administration- (a) a slip or accident has occurred; or (b) there is apprehension of any slip or accident to any cutting, embankment or other work on a railway, it may enter upon any lands adjoining 163 Pramod P. Goel

Tenders, contracts and arbitration the railway and do all such works as may be necessary for the purpose of repairing or preventing such slip or accident and submit a report thereof to the Central Government in such manner and within such time as may be prescribed. (3) The Central Government may, after considering the report under sub-section (1) or sub-section (2), in the interest of public safety, by order, direct the railway administration that further action under sub-section (1) or sub-section (2) shall be stopped or the same shall be subject to such conditions as may be specified in that order. 15. Payment of amount for damage or loss(1) No suit shall lie against a railway administration to recover any amount for any damage or loss caused in the exercise of the powers conferred by any of the foregoing provisions of this Chapter. (2) A railway administration shall pay or tender payment for any damage or loss caused in the exercise of the powers conferred by any of the foregoing provisions of this Chapter, and in case of a dispute as to the sufficiency of any amount so paid or tendered or as to the persons entitled to receive the amount, it shall immediately refer the dispute for the decision of the District Judge of the district and his decision thereon shall be final: Provided that where the railway administration fails to make a reference within sixty days from the date of commencement of the dispute, the District Judge may, on an application made to him by the person concerned, direct the railway administration to refer the dispute for his decision. (3) The reference under sub-section (2) shall be treated as an appeal under section 96 of the Code of Civil Procedure, 1908 (5 of 1908) and shall be disposed of accordingly. (4) Where any amount has been paid as required by sub-section (2), the railway administration shall, notwithstanding anything in any other law for the time being in force, be discharged from all liabilities to any person whatsoever in respect of any amount so paid. 16. Accommodation works(1) A railway administration shall make and maintain the following works for the accommodation of the owners and occupiers of lands adjoining the railway, namely:- (a) such crossings, bridges, culverts and passages over, under or by the sides of, or leading to or from, the railway as may, in the opinion of the State Government, be necessary for the purpose of making good any interruptions caused by the railway to the use of the lands through which the railway is made; and (b) all necessary bridges, tunnels, culverts, drains, water sources or other passages, over, under or by the sides of the railway, of such dimensions as will, in the opinion of the State Government, be sufficient at all times to convey water as 164

freely from or to the lands lying near or affected by the railway as it was before the making of the railway or as nearly as possible. (2) Subject to the other provisions of this Act, the works specified in sub-section (1) shall be made at the cost of the railway administration during or immediately after the laying out or formation of the railway over the lands traversed and in such a manner as to cause as little damage or inconvenience as possible to persons interested in the lands or affected by the works: Provided that- (a) a railway administration shall not be required to make any administration shall be liable to execute any further or additional the working or using of the railway, or to make any accommodation works with respect to which the owners or occupiers of the lands have been paid compensation in consideration of their not requiring the said works to be made; (b) save as hereinafter, in this Chapter, provided, no railway administration shall be liable to execute any further or additional accommodation works for the use of the owners or occupiers of the lands after the expiration of ten years from the date on which the railway passing through the lands was first opened for public traffic; (c) where a railway administration has provided suitable accommodation work for the crossing of a road or stream and the road or stream is afterwards diverted by the act or neglect of the person having the control thereof, the railway administration shall not be compelled to provide any other accommodation work for the crossing of such road or stream. (3) The State Government may specify a date for the commencement of any work to be executed under sub-section (1) and, if within three months next after that date, the railway administration fails to commence the work or having commenced it, fails to proceed diligently to execute it, the Central Government shall, on such failure being brought to its notice by the State Government, issue such directions to the railway administration as it thinks fit. Explanation.-For the purposes of this section, the expression "lands" shall include public roads. 17. Power of owner, occupier, State Government or local authority to cause additional accommodation works to be made.(1) If an owner or occupier of any land affected by a railway considers the works made under section 16 to be insufficient for the use of the land, or if the State Government or a local authority desires to construct a public road or other work across, under or over a railway, such owner or occupier, or, as the case may be, the State Government or the local authority may, at any time, require the railway administration to make at the expense of the owner or occupier or of the State Government or the local authority, as the case may be, such further accommodation works as are considered necessary and are agreed to by the railway administration.

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Tenders, contracts and arbitration (2) The accommodation works made under sub-section (1) shall be maintained at the cost of the owner or occupier of the land, the State Government or the local authority, at whose request the works were made. (3) In the case of any difference of opinion between the railway administration and the owner or occupier, the State Government or the local authority, as the case may be, in relation to- (i) the necessity of such further accommodation works; or (ii) the expenses to be incurred on the construction of such further accommodation works; or (iii) the quantum of expenses on the maintenance of such further accommodation works, it shall be referred to the Central Government whose decision thereon shall be final. 18. Fences, gates and bars.- The Central Government may, within such time as may be specified by it or within such further time, as it may grant, require that- (a) boundary marks or fences be provided or renewed by a railway administration for a railway or any part thereof and for roads constructed in connection therewith; (b) suitable gates, chains, bars, stiles or hand-rails be erected or renewed by a railway administration at level crossings; (c) persons be employed by a railway administration to open and shut gates, chains or bars. 19. Over-bridges and under-bridges.(1) Where a railway administration has constructed lines of rails across a public road at the same level, the State Government or the local authority maintaining the road, may, at any time, in the interest of public safety, require the railway administration to take the road either under or over the railway by means of a bridge or arch with convenient ascents and descents and other convenient approaches, instead of crossing the road on the level, or to execute such other works as may, in the circumstances of the case, appear to the State Government or the local authority maintaining the road to be best adapted for removing or diminishing the danger arising from the level crossing. (2) The railway administration may require the State Government or the local authority, as the case may be, as a condition of executing any work under subsection (1), to undertake to pay the whole of the cost of the work and the expense of maintaining the work, to the railway administration or such proportion of the cost and expenses as the Central Government considers just and reasonable. (3) In the case of any difference of opinion between the railway administration and the State Government or the local authority, as the case may be, over any of the matters mentioned in sub-section (1), it shall be referred to the Central Government, whose decision thereon shall be final. 20. Power of Central Government to give directions for safety.Notwithstanding anything contained in any other law, the Central Government may, if it is of the opinion that any work undertaken or may be undertaken, is 166

likely to alter or impede the natural course of water flow or cause an increase in the volume of such flow endangering any cutting, embankment or other work on a railway, issue directions in writing to any person, officer or authority responsible for such work to close, regulate or prohibit that work. *****

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Tenders, contracts and arbitration ANNEXURE-II Sections 7, 12, 16, 17, 18, 19, 20, 21 & 29 of Contract Labour (Regulation & Abolition) Act 1970, reproduced for ready reference. Section 7: Registration of certain establishmentsEvery principal employer of an establishment to which this Act applies shall, within such period as the appropriate Government may, by notification in the Official Gazette, fix in this behalf with respect to establishments generally or with respect to any class of them, make an application to the registering officer in the prescribed manner for registration of the establishment: Provided that the registering officer may entertain any such application for registration after expiry of the period fixed in this behalf, if the registering officer is satisfied that the applicant was prevented by sufficient cause from making the application in time. If the application for registration is complete in all respects, the registering officer shall register the establishment and issue to the principal employer of the establishment a certificate of registration containing such particulars as may be prescribed. Section 12: Licensing of contractorsWith effect from such date as the appropriate Government may, by notification in the Official Gazette, appoint, no contractor to whom this Act applies, shall undertake or execute any work through contract labour except under and in accordance with a licence issued in that behalf by the licensing officer. Subject to the provisions of this Act, a licence under sub-section (1) may contain such conditions including, in particular, conditions as to hours of work, fixation of wages and other essential amenities in respect of contract labour as the appropriate Government may deem fit to impose in accordance with the rules, if any, made under section 35 and shall be issued on payment of such fees and on the deposit of such sum, if any, as security for the due performance of the conditions as may be prescribed. Section 16: Canteens1) The appropriate Government may make rules requiring that in every establishment a) To which this Act applies, b) Wherein work requiring employment of contract labour is likely to continue for such period as may be prescribed, and 168

c) Wherein contract labour numbering one hundred or more is ordinarily employed by a contractor, one or more canteens shall be provided and maintained by the contractor for the use of such contract labour. 2) Without prejudice to the generality of the foregoing power, such rules may provide fora) The date by which the canteens shall be provided; b) The number of canteens that shall be provided, and the standards in respect of construction, accommodation, furniture and other equipment of the canteens; and c) The foodstuffs which may be served therein and the charges which may be made thereof. Section 17: Rest-rooms.1) In every place wherein contract labour is required to halt at night in connection with the work of an establishment a) To which this Act applies, and b) in which work requiring employment of contract labour is likely to continue for such period as may be prescribed, there shall be provided and maintained by the contractor for the use of the contract labour such number of rest-rooms or such other suitable alternative accommodation within such time as may be prescribed. 2) The rest rooms or the alternative accommodation to be provided under subsection shall be sufficiently lighted and ventilated and shall be maintained in a clean and comfortable condition. Section 18: Other facilities- It shall be the duty of every contractor employing contract labour in connection with the work of an establishment to which this Act applies, to provide and maintain a) a sufficient supply of wholesome drinking water for the contract labour at convenient places; b) a sufficient number of latrines and urinals of the prescribed types so situated as to be convenient and accessible to the contract labour in the establishment; and c) washing facilities. Section 19: First-aid facilities- There shall be provided and maintained by the contractor so as to be readily accessible during all working hours a first-aid box equipped with the prescribed contents at every place where contract labour is employed by him. Section 20: Liability of principal employer in certain cases1) If any amenity required to be provided under section 16, section 17, section 18 or section 19 for the benefit of the contract labour employed in an 169 Pramod P. Goel

Tenders, contracts and arbitration establishment is not provided by the contractor within the time prescribed thereof, such amenity shall be provided by the principal employer within such time as may be prescribed. 2) All expenses incurred by the principal employer in providing the amenity may be recovered by the principal employer from the contractor either by deduction from any amount payable to the contractor under any contract or as a debt payable by the contractor. Section 21: Responsibility for payment of wages1) A contractor shall be responsible for payment of wages to each worker employed by him as contract labour and such wages shall be paid before the expiry of such period as may be prescribed. 2) Every principal employer shall nominate a representative duly authorized by him to be present at the time of disbursement of wages by the contractor and it shall be the duty of such representative to certify the amounts paid as wages in such manner as may be prescribed. 3) It shall be the duty of the contractor to ensure the disbursement of wages in the presence of the authorized representative of the principal employer. 4) In case the contractor fails to make payment of wages within the prescribed period or makes short payment, then the principal employer shall be liable to make payment of wages in full or the unpaid balance due, as the case may be, to the contract labour employed by the contractor and recover the amount so paid from the contractor either by deduction from any amount payable to the contractor under any contract or as a debt payable by the contractor. Section 29: Registers and other records to be maintained1) Every principal employer and every contractor shall maintain such registers and records giving such particulars of contract labour employed, the nature of work performed by the contract labour, the rates of wages paid to the contract labour and such other particulars in such form as may be prescribed. 2) Every principal employer and every contractor shall keep exhibited in such manner as may be prescribed within the premises of the establishment where the contract labour is employed, notices in the prescribed form containing particulars about the hours of work, nature of duty and such other information as may be prescribed. *****

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ANNEXURE-III Clauses to be provided in Joint Venture agreement: 1. Joint and several liability: The members of the JV firm to which the contract is awarded, shall be jointly and severally liable to the employer for execution of the project in accordance with General and Special conditions of the contract. The JV members shall also be liable jointly and severally for the loss, damages caused to the Railway during the course of execution of the contract or due to non-execution of the contract or part thereof. 2. Duration of Joint Venture Agreement: It shall be valid during the entire currency of the contract including the period of extension if any and the maintenance period after the work is completed. 3. Governing Laws: The joint Venture Agreement shall in all respect be governed by and interpreted in accordance with Indian Laws. *****

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Tenders, contracts and arbitration ANNEXURE-IV Proforma of Agreement

An agreement made this.. day of .between the President of India, acting through the ..or his successor, Central Organisation, Railway Electrification, Allahabad of the Ministry of Railways, Railway Board (herein after referred to as The Purchaser) of the one part and M/s..(herein after referred to as The contractor) of the other part. Whereas in response to a call for tender for Design, Supply, erection, Testing & commissioning of 25 KV AC single phase, 50 Hz traction overhead equipments, switching stations, Booster Transformer Stations, and LT supply transformer stations in of .. railway as per tender papers at annexure A hereto the contractor has submitted a tender as per their original tender offer number. Dated.. and negotiated offer number.. dated . And whereas the said Tender of the Contractor has been accepted for Design, Supply, erection, Testing & commissioning of 25 KV AC single phase, 50 Hz traction overhead equipments, switching stations, Booster Transformer Stations, and LT supply transformer stations in .. of . Railway as per the copy of Letter of Acceptance of Tender number. dated .. as per Annexure B complete with enclosures at the accepted rates and agreed deviations from tender notice number at an estimated contract value of Rs (Rupees .only). Now this agreement witnesseth that in consideration of the premises nd the payment to be made by the purchaser to the Contractor provided for herein below the contractor shall supply all equipments and materials and execute and perform all works for which the said tender of the contractor has been accepted strictly according to the various provisions in annexure A & B hereto and upon such supply pay to the contractor at the several rates accepted as per the Schedule-1, section-1 &2 as well as Schedule-3, Section-1 and in terms of the provisions therein. In witness where of the parties have hereunto set and subscribed their respective hands and/or seals the day & year respectively mentioned against their respective signatures. Signed & delivered at Allahabad by Shri .., the contractor within named in the presence of: For M/s. ()

Signature .. (..) Date: Name in Block Capitals Address .. .. 2. Signature .. (..) Date: Name in Block Capitals Address .. .. Signed & delivered at Allahabad for and on behalf of the President of India by Shri .., Central Organisation Railway Electrification , Allahabad, Ministry of Railways (railway Board) in presence of : 1. () Chief Electrical engineer, Central organisation, Railway Electrification,

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Allahabad For & on behalf of The President of India

1.

2.

Signature .. Date: Name in Capitals Address .. .. Signature .. Date: Name in Capitals Address .. ..

(..) Block

(..) Block

Enclosures: 1. Annexure- A: Tender paper number, correction slips number .. 2. Annexure- B: Letter of Acceptance number.dated.complete with enclosures. 3. Annexure-C: Amendment and corrigendum slip numbers .. 4. Annexure- E: Schedule of work and time schedule. 5. schedule-1 NOTE: The format for agreement may differ from work to work with minor deviations.

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Tenders, contracts and arbitration

ANNEXURE - V Contract termination Notice No. GM/PCE/CAO (C) Sub:.. Dear Sir, 1. In terms of the conditions of contract agreement No.. Dated governing the execution of the above work, it was required to be completed by the stipulated date of completion/mutually extended date of completion viz. You have failed to complete the work by the agreed date of completion. You have also failed to apply for further extension of period of completion on valid and reasonable grounds as acceptable to the Railway. Due to your failure to fulfil your contractual obligations, the contract stands terminated with effect from date of completion of the contract i.e. (date) Please note that for non fulfilment of the contract the Railway reserve the right to claim damages under clause 62 of the General Conditions of Contract in addition to any other rights available to it under the law. Final measurements of the work done by you shall be recorded on (date) .Please arrange to be present at site to witness and also sign the measurements, failing which the work will be measured in your absence and such measurements as per provisions of the contract agreement shall, not withstanding such absence, be binding upon you, whether or not you shall have signed the measurement book. Office of the Dated:

2.

3.

Yours faithfully,

For & on behalf of the President of India.

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ANNEXURE - VI Format for confidential report on contractors.

PeriodFrom: To: : : : : : :

Name (Name of partners if a company) Total Value of work entrusted Value of work done during the year Broad description of the type of work Quality in execution Good/Good/Average/Below Average. Promptness in execution Good/Good/Average/Below Average. Dependability in regard to time of completion. Good/Good/Average/ Below Average. Organisation: a) Labour Adequate/Totally insufficient. b) Equipment c) Technical Supervision Adequate/Totally insufficient. Tendency to raise Claims a) Unjustified claim : b) Justified claim consent. : 3) Tendency to take to Court Tendency for unnecessary correspondence to create records for claims Relationship with. a) Staff. : Assessment as to the value of work that can be entrusted to him General Assessment Any other remarks Name: Countersigned by: Name: Designation: Date:

Excellent/very Excellent/Very

Excellent/Very

: :

Adequate/Not

Adequate/Not Adequate/Totally insufficient. : Adequate/Not

: 1) To seek arbitration 2) Take to the Court. : 1) Settle by mutual 2) Tendency for arbitration. : Yes/No

Signature of the Reporting Officer Designation: Date:

*****

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Tenders, contracts and arbitration ANNEXURE - VII Clauses 7, 25, 27, 28 & 64 of GCC reproduced: Clause 7: Right of Railway to deal with Tenders: The Railway reserves right of not to invite tenders for any Railway work or works or to invite open or limited tenders as and when tenders are called to accept a tender in whole or in part or reject any tender or all tenders without assigning reasons for any such action. Clause 25: Stores, storehouses and yards: The contractor shall at his own expense provide himself with sheds, stores and yards in such situations and in such numbers as in the opinion of the Engineer is requisite to carryon the works and the contractor shall keep at each such sheds, store houses and yards a sufficient quantity of materials and plant in stock not to delay the carrying out the works with due expedition and the Engineer and the Engineers representative shall have free access to the said sheds, store houses and yards at any time for the purpose of inspecting the stock of material or plant so kept in hand , any materials or plant which the Engineer may object to shall not be brought upon or used in the works, but shall be forthwith removed from the sheds, store houses or yards by the contractor. The contractor shall at his own expenses provide and maintain suitable mortar mills, soaking vats or any other equipments necessary for the execution of works. Clause 27: (1) Workmanship and testing: The whole of the work and/or supply of material specified and provided in the contract or that may be necessary to be done in order to form and complete any part thereof shall be executed in the best and most substantial workman like manner with materials of the best and most approved quality of their most respective kinds, agreeable to the particulars contained in or implied by the specifications and as referred to and represented by the drawings or in such other additional particulars, instructions and drawings may be found requisite to be given during the carrying on of the works and to the entire satisfaction of the Engineer according to the instructions and directions which the contractors may from time to time receive from the Engineer. The materials may be subjected to tests by means of such machines, instruments and appliances as the Engineer may direct and wholly at the expense of the contractor. (2) Removal of the improper work and materials: The Engineer or the Engineers representative shall be entitled to order from time to time(a) the removal from the site within the time specified in order of any materials which in his opinion are not in accordance with the specifications or drawings, (b) the substitution of proper materials and, (c) the removal and proper re-execution, not withstanding any previous tests thereof or on-account payments there for, of any work which in respect of materials and workmanship is not in his opinion in accordance with the specifications and in case of default on the part of the contactor in carrying out such order the railway shall be entitled to rescind the contract under clause 62 of these conditions. Clause 28: Facilities for inspection: the contractor shall afford the Engineer and Engineers representative every facility for entering in and upon every portion of 176

the work at all hours for the purpose of inspection or otherwise and shall provide all labour, material, planks , ladder, pumps, appliances and things of every kinds required for the purpose and the Engineer and Engineers representative shall at all time have the access to every part of the works and to all places at which materials for the work are stored or being prepared. Clause 64: Demand for arbitration: 64 (1) (i) Demand for arbitration: In the event of any dispute or difference between the parties hereto as to the construction or operation of this contract, or the respective rights and liabilities of the parties or any matter in question, dispute or difference on any account or as to the withholding by the Railway Electrification of any certificate to which the contractor may claim to be entitled to, or if the Railway Electrification fails to make a decision within 120 days, then and in any such case, but except in any of the 'excepted matters referred to in clause 63 of these conditions, the contractor, after 120 days but within 180 days of his presenting his final claim on disputed matters, shall demand in writing that the dispute or difference be referred to arbitration. 64 (1) (ii) The demand for arbitration shall specify the matters which are in question, or subject of the dispute or difference as also the amount of claim item wise. Only such dispute(s) or difference(s) in respect of which the demand has been made, together with counter claims or set off, given by Railway, shall be referred to arbitration and other matters shall not be included in the reference [Railway Boards circular number 2003/CE-I/CT/4, dated 9.10.2003]. 64 (1) (ii) (a) The Arbitration proceedings shall be assumed to have commenced from the day, a written and valid demand for arbitration is received by the Railway. (b) The claimant shall submit his claim stating the facts supporting the claims along with all relevant documents and the relief or remedy sought against each claim within a period of 30 days from the date of appointment of the Arbitral Tribunal. (c) The Railway shall submit its defence statement and counter claim(s), if any, within a period of 60 days of receipt of copy of claims from Tribunal thereafter, unless otherwise extension has been granted by Tribunal. (d) Place of arbitration: The place of arbitration would be within the geographical limits of the Division of the Railway where the cause of action arose or the Headquarters of the concerned Railway or any other place with the written consent of both the parties [Railway Boards circular number 96/CE.I/CT/29 (Vol.I0, dated 5.1.2005]. 64 (1) (iii) No new claim shall be added during proceedings by either party. However, a party may amend or supplement the original claim or defence thereof during the course of arbitration proceedings subject to acceptance by Tribunal having due regard to the delay in making it. 64 (1) (iv) If the contractor(s) does/ do not prefer his/ their specific and final claims in writing, within a period of 90 days of receiving the intimation from the Railway that the final bill is ready for payment, he/ they will be deemed to have waived his/ their claim(s) and the Railway shall be discharged and released of all liabilities under the contract in respect of these claims. 177 Pramod P. Goel

Tenders, contracts and arbitration 64 (2) Obligation during pendency of arbitration - Work under the contract shall, unless otherwise directed by the Engineer, continue during the arbitration proceedings, and no payment due or payable by the Railway shall be withheld on account of such proceedings, provided, however, it shall be open for Arbitral Tribunal to consider and decide whether or not such work should continue during arbitration proceedings. 64 (3)(a)(i) In cases where the total value of all claims in question added together does not exceed `10,00,000/- (Rupees ten lakh only), the Arbitral Tribunal shall consist of a sole arbitrator who shall be a gazetted officer of Railway not below the grade of JA grade nominated by the General Manager. The sole arbitrator shall be appointed within 60 days from the day when a written and valid demand for arbitration is received by General Manager [Railway Boards circular number 2003/CE-I/CT/4, dated 9.10.2003]. 64 (3) (a) (ii) In cases not covered by clause 64 (3)(a)(i), the Arbitral Tribunal shall consist of a panel of three Gazetted Railway Officers not below JA grade or 2 railway gazetted officers not below JA grade and a retired Railway officer, retired not below the rank of SAG officer, as the arbitrators. For this purpose, the Railway will send a panel of more than 3 names of Gazetted Railway Officers of one or more departments, of the Railway. Which may also include the name(s) of retired Railway officer(s) empanelled to work as Railway Arbitrator to the contractor within 60 days from the day when a written and valid demand for arbitration is received by the General Manager. Contractor will be asked to suggest to General Manager at least 2 names out of the panel for appointment as contractor's nominee within 30 days from the date of dispatch of the request by Railway. The General Manager shall appoint at least one out of them as the contractor's nominee and will, also simultaneously appoint the balance number of arbitrators either from the panel or from outside the panel, duly indicating the presiding arbitrator from amongst the 3 arbitrators so appointed. General Manager shall complete this exercise of appointing the Arbitral Tribunal within 30 days from the receipt of names of contractors nominees. While nominating the arbitrators it will be necessary to ensure that one of them is from the Accounts department. An officer of Selection Grade of the Accounts department shall be considered of equal status to the officers in SA Grade of other departments of the Railways for the purpose of appointment of arbitrators [Railway Boards circular number 2003/CE-I/CT/4, dated 9.10.2003]. 64 (3) (a) (iii) If one or more of the arbitrators appointed as above refuses to act as arbitrator, withdraws from his office as arbitrator, or vacates his/ their office/ offices or is/ are unable or unwilling to perform his functions as arbitrator for any reason whatsoever or dies or in the opinion of the General Manager fails to act without undue delay, the General Manager shall appoint new arbitrator/ arbitrators to act in his/ their place in the same manner in which the earliest arbitrator/ arbitrators had been appointed. Such re-constituted Tribunal may, at its discretion, proceed with the reference from the stage at which it was left by the previous arbitrator(s). 178

64 (3) (a) (iv) The arbitral Tribunal shall have power to call for such evidence by way of affidavits or otherwise as the Arbitral Tribunal shall think proper, and it shall be the duty of the parties hereto to do or cause to be done all such things as be necessary to enable the Arbitral Tribunal to make the award without any delay. The Arbitral tribunal should record day to day proceedings. The proceedings shall normally be conducted on the basis of documents and witness statements [Railway Boards circular number 96/CE.I/CT/29 (Vol.I), dated 5.1.2005]. 64 (3) (a) (v) While appointing arbitrator(s) under sub-clause (i), (ii) and (iii) above, due care shall be taken that he/ they is/ are not the one/ those who had an opportunity to deal with the matters to which the contract relates or who in the course of his/ their duties as Railway servant(s) expressed views on all or any of the matters under dispute or differences. The proceedings of the Arbitral Tribunal or the award made by such Tribunal will, however, not be invalid merely for the reason that one or more arbitrator had, in the course of his service, opportunity to deal with the matters to which the contract relates or who in the course of his/ their duties expressed views on all or any of the matters under dispute. 64 (3) (b) (i) The arbitral award shall state item wise, the sum and reasons upon which it is based. The analysis and reasons shall be detailed enough so that the award could be inferred there from [Railway Boards circular number 96/CE.I/ CT/29 (Vol.I), dated 5.1.2005]. 64 (3) (b) (ii) A party may apply for corrections of any computational errors, any typographical or clerical errors or any other error of similar nature occurring in the award and interpretation of a specific point of award to tribunal within 60 days of receipt of the award[Railway Boards circular number 96/CE.I/ CT/29 (Vol.I), dated 5.1.2005]. 64 (3) (b) (iii) A party may apply to tribunal within 60 days of receipt of award to make an additional award as to claims presented in the arbitral proceedings but omitted from the arbitral award [Railway Boards circular number 96/CE.I/ CT/29 (Vol.I), dated 5.1.2005]. 64.4 In case of the Tribunal, comprising of three Members, any ruling or award shall be made by a majority of Members of Tribunal. In the absence of such a majority, the views of the Presiding Arbitrator shall prevail. 64.5 Where the arbitral award is for the payment of money, no interest shall be payable on whole or any part of the money for any period till the date on which the award is made. 64.6 The cost of arbitration shall be borne by the respective parties. The cost shall inter-alia include fee of the arbitrator(s) as per the rates fixed by the Railway Board from time to time and the fee shall be born equally by both the parties. Further, the fee payable to the arbitrator(s) would be governed by the instructions issued by on the subject by Railway Board from time to time irrespective of the fact whether the arbitrator(s) is/are appointed by the Railway Administration or 179 Pramod P. Goel

Tenders, contracts and arbitration by the court of law unless specifically directed by Honble court otherwise on the matter [Railway Boards circular number 96/CE.I/ CT/29 (Vol.I), dated 5.1.2005]. 64.7 Subject to the provisions of the aforesaid Arbitration and Conciliation Act 1996 and the rules there under and any statutory modification thereof shall apply to the arbitration proceedings under this clause. *****

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ANNEXURE VIII THE ARBITRATION AND CONCILIATION ACT, 1996 [No.26 of 1996][16th August, 1996] An Act to consolidate and amend the law relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards as also to define the law relating to conciliation and for matters connected therewith or incidental thereto. WHEREAS the United Nations Commission on International Trade Law (UNCITRAL) has adopted the UNCITRAL Model Law on International Commercial Arbitration in 1985: AND WHEREAS the General Assembly of the United Nations has recommended that all countries give due consideration to the said Model Law, in view of the desirability of uniformity of the law of arbitral procedures and the specific needs of international commercial arbitration practice; AND WHEREAS the UNCITRAL has adopted the UNCITRAL Conciliation Rules in 1980; AND WHEREAS the General Assembly of the United Nations has recommended the use of the said Rules in cases where a dispute arises in the context of international commercial relations and the parties seek an amicable settlement of that dispute by recourse to conciliation; AND WHEREAS the said Model Law and Rules make significant contribution to the establishment of a unified legal framework for the fair and efficient settlement of disputes arising in international commercial relations; AND WHEREAS it is expedient to make law respecting arbitration and conciliation, taking into account the aforesaid Model Law and Rules; BE it enacted by Parliament in the Forty-seventh Year of the Republic of India as follows: PRELIMINARY: 1) Short title, extent and commencement- (1) This Act may be called the Arbitration and Conciliation Act, 1996. 2) It extends to the whole of India: Provided that Parts, I, III and IV shall extend to the State of Jammu and Kashmir only in so far as they relate to international commercial arbitration or, as the case may be, international commercial conciliation. Explanation- In this sub-section, the expression "international commercial conciliation" shall have the same meaning as the expression "international commercial arbitration" in clause (f) of sub-section (1) of section 2, subject to the modification that for the word "arbitration" occurring therein, the word "conciliation" shall be substituted. 3) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint. PART I ARBITRATION - CHAPTER- I General provisions 2. 1) DefinitionsIn this Part, unless the context otherwise requires-

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a) b) c) d) e) "arbitration" means any arbitration whether or not administered by permanent arbitral institution; "arbitration agreement" means an agreement referred to in section 7; "arbitral award" includes an interim award; "arbitral tribunal" means a sole arbitrator or a panel of arbitrators; "Court" means the principal Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, but does not include any civil court of a grade inferior to such principal Civil Court, or any Court of Small Causes; "international commercial arbitration" means an arbitration relating to disputes arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India and where at least one of the parties isi) An individual who is a national of, or habitually resident in, any country other than India; or ii) A body corporate which is incorporated in any country other than India; or iii) A company or an association or a body of individuals whose central management and control is exercised in any country other than India; or (iv) The Government of a foreign country; "legal representative" means a person who in law represents the estate of a deceased person, and includes any person who intermeddles with the estate of the deceased, and, where a party acts in a representative character, the person on whom the estate devolves on the death of the party so acting; "party" means a party to an arbitration agreement. This Part shall apply where the place of arbitration is in India. This Part shall not affect any other law for the time being in force by virtue of which certain disputes may not be submitted to arbitration. This Part except sub-section (1) of section 40, sections 41 and 43 shall apply to every arbitration under any other enactment for the time being in force, as if the arbitration were pursuant to an arbitration agreement and as if that other enactment were an arbitration agreement, except in so far as the provision of this Part are inconsistent with that other enactment or with any rules made there under; Subject to the provisions of sub-section (4), and save in so far as is otherwise provided by any law for the time being in force or in any agreement in force between India and any other country or countries, this Part shall apply to all arbitrations and to all proceedings relating thereto. Where this Part, except section 28, leaves the parties free to determine a certain issue, that freedom shall include the right of the parties to authorise any person including an institution, to determine that issue. An arbitral award made under this Part shall be considered domestic award. Where this Partrefers to the fact that the parties have agreed or that they may agree, or in any other way refers to an agreement of the parties, that agreement shall include any arbitration rules referred to in that agreement. Where this Part, other than clause (a) of section 25 or clause (a) of sub-section (2) of section 32, refers to a claim, it shall also apply to a counterclaim, and where it refers to a defence, it shall also apply to a defence to that counterclaim.

f)

(g)

(h) 2) 3) 4)

5)

6)

7) 8) (a) (b) 9)

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3. Receipt of written communications1) Unless otherwise agreed by the parties(a) Any written communication is deemed to have been received if it is delivered to the addressee personally or at his place of business, habitual residence or mailing address, and (b) if none of the places referred to in clause (a) can be found after making a reasonable inquiry, a written communication is deemed to have been received if it is sent to the addressee's last known place of business, habitual residence or mailing address by registered letter or by any other means which provides a record of the attempt to deliver it. (2) The communication is deemed to have been received on the day it is so delivered. (3) This section does not apply to written communications in respect of proceedings of any judicial authority. 4. Waiver of right to object.- A party who knows that(a) Any provision of this Part from which the parties may derogate, or (b) Any requirement under the arbitration agreement, has not been complied with and yet proceeds with the arbitration without stating his objection to such noncompliance without undue delay or, if a time limit is provided for stating that objection, within that period of time, shall be deemed to have waived his right to so object. 5. Extent of judicial intervention.- Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part. 6. Administrative assistance.- In order to facilitate the conduct of the arbitral proceedings, the parties, or the arbitral tribunal with the consent of the parties, may arrange for administrative assistance by a suitable institution or person. CHAPTER II Arbitration agreement 7. Arbitration agreement1) In this Part, "arbitration agreement" means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. 2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. 3) An arbitration agreement shall be in writing. 4) An arbitration agreement is in writing if it is contained ina) A document signed by the parties; b) An exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement; or c) An exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other. 5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.

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8. Power to refer parties to arbitration where there is an arbitration agreement.1) A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration. 2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof. 3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, arbitration may be commenced or continued and an arbitral award made. 9. Interim measures etc. by Court.- A party may, before, or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, apply to a courti) For the appointment of a guardian for a minor or person of unsound mind for the purposes of arbitral proceedings; or ii) For an interim measure or protection in respect of any of the following matters, namely:(a) The preservation, interim custody or sale of any goods which are the subjectmatter of the arbitration agreement; (b) Securing the amount in dispute in the arbitration; (c) the detention, preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party or authorising any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence; (d) Interim injunction or the appointment of a receiver; (e) Such other interim measure of protection as may appear to the Court to be just and convenient, and the Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it. CHAPTER III Composition of arbitral tribunal 10. Number of arbitrators.1) The parties are free to determine the number of arbitrators, provided that such number shall not be an even number. 2) Failing the determination referred to in sub-section (1), the arbitral tribunal shall consist of a sole arbitrator. 11. Appointment of arbitrators.1) A person of any nationality may be an arbitrator, unless otherwise agreed by the parties. 2) Subject to sub-section (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators. 3) Failing any agreement referred to in sub-section (2), in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator. 4) If the appointment procedure in sub-section (3) applies and-

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a)

a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or b) the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment, the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him. 5) Failing any agreement referred to in sub-section (2), in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him. 6) Where, under an appointment procedure agreed upon by the parties,a) A party fails to act as required under that procedure; or b) The parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or c) A person, including an institution, fails to perform any function entrusted to him or it under that procedure, a party may request the Chief Justice or any person or institution designated by him to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment. 7) A decision on a matter entrusted by sub-section (4) or sub-section (5) or sub-section (6) to the Chief Justice or the person or institution designated by him is final. 8) The Chief Justice or the person or institution designated by him, in appointing an arbitrator, shall have due regard toa) any qualifications required of the arbitrator by the agreement of the parties and b) other considerations as are likely to secure the appointment of an independent and impartial arbitrator. 9) In the case of appointment of sole or third arbitrator in an international commercial arbitration, the Chief Justice of India or the person or institution designated by him may appoint an arbitrator of a nationality other than the nationalities of the parties where the parties belong to different nationalities. 10) The Chief Justice may make such scheme as he may deem appropriate for dealing with matters entrusted by sub-section (4) or sub-section (5) or sub-section (6) to him. 11) Where more than one request has been made under sub-section (4) or sub-section (5) or sub-section (6) to the Chief Justices of different High Courts or their designates, the Chief Justice or his designate to whom the request has been first made under the relevant sub-section shall alone be competent to decide on the request. 12) (a) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and (10) arise in an international commercial arbitration the reference to "Chief Justice" in those sub-sections shall be construed as a reference to the "Chief Justice of India". (b) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and (10) arise in any other arbitration, the reference to "Chief Justice" in those subsection shall be construed as a reference to, the Chief Justice of the High Court within whose local limits the principal Civil Court referred to in clause (e) of sub-section (1) of section 2 is situate and, where the High Court itself is the "Court referred to in that clause, to the Chief Justice of that High Court.

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12. Grounds for challenge.1) When a person is approached in connection with his possible appointment as an arbitrator, he shall disclose in writing any circumstances likely to give rise to justifiable doubts as to his independence or impartiality. 2) An arbitrator, from the time of his appointment and throughout the arbitral proceedings, shall, without delay, disclose to the parties in writing any circumstances referred to in subsection (1) unless they have already been informed of them by him. 3) An arbitrator may be challenged only if: (a) circumstances exist that give rise to justifiable doubts as to his independence or impartiality, or (b) he does not possess the qualifications agreed to by the parties. 4) A party may challenge an arbitrator appointed by him, or in whose appointment he has participated, only for reasons of which he becomes aware after the appointment has been made. 13. Challenge procedure1) Subject to sub-section (4), the parties are free to agree on a procedure for challenging an arbitrator. 2) Failing any agreement referred to in sub-section (1), a party who intends to challenge an arbitrator shall, within fifteen days becoming aware of the constitution of the arbitral tribunal or after becoming aware of any circumstances referred to in sub-section (3) of section 12, send a written statement of the reasons for the challenge to the arbitral tribunal. 3) Unless the arbitrator challenged under sub-section (2) withdraws from his office or the other party agrees to the challenge, the arbitral tribunal shall decide on the challenge. 4) If a challenge under any procedure agreed upon by the parties or under the procedure under sub-section 2) is not successful, the arbitral tribunal shall continue the arbitral proceedings and make an arbitral award. 5) Where an arbitral award is made under sub-section (4), the party challenging the arbitrator may make an application for setting aside such an arbitral award in accordance with section 34. 6) Where an arbitral award is set aside on an application made under sub-section (5), the Court may decide as to whether the arbitrator who is challenged is entitled to any fees. 14. Failure or impossibility to act.1) The mandate of an arbitrator shall terminate ifa) He becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay; and b) He withdraws from his office or the parties agree to the termination of his mandate. 2) If a controversy remains concerning any of the grounds referred to in clause (a) of subsection (1), a party may, unless otherwise agreed by the parties, apply to the Court to decide on the termination of the mandate. 3) If, under this section or sub-section (3) of section 13, an arbitrator withdraws from his office or a party agrees to the termination of the mandate of an arbitrator, it shall not imply acceptance of the validity of any ground referred to in this section or sub-section (3) of section 12.

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15. Termination of mandate and substitution of arbitrator.- (1) In addition to the circumstances referred to in section 13 or section 14, the mandate of an arbitrator shall terminate: (a) Where he withdraws from office for any reason; or (b) By or pursuant to agreement of the parties. 2) Where the mandate of an arbitrator terminates, a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced. 3) Unless otherwise agreed by the parties, where an arbitrator is replaced under subsection (2) , any hearings previously held may be repeated at the discretion of the arbitral tribunal. 4) Unless otherwise agreed by the parties, an order or ruling of the arbitral tribunal made prior to the replacement of an arbitrator under this section shall not b invalid solely because there has been a change in the composition of the arbitral tribunal. CHAPTER IV Jurisdiction of arbitral tribunals 16. Competence of arbitral tribunal to rule on its jurisdiction.1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose,(a) an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract; and (b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause. 2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence; however, a party shall not be precluded from raising such a plea merely because that he has appointed, or participated in the appointment of, an arbitrator. 3) A plea that the arbitral tribunal is exceeding the scope of its authority shall he raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings. 4) The arbitral tribunal may, in either of the cases referred to in sub-section (2) or subsection (3), admit a later plea if it considers the delay justified. 5) The arbitral tribunal shall decide on a plea referred to in sub-section (2) or sub-section (3) and, where the arbitral tribunal takes a decision rejecting the plea, continue with the arbitral proceedings and make an arbitral award. 6) A party aggrieved by such an arbitral award may make an application for setting aside such an arbitral award in accordance with section 34. 17. Interim measures ordered by arbitral tribunal.1) Unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, order a party to take any interim measure of protection as the arbitral tribunal may consider necessary in respect of the subject matter of the dispute. 2) The arbitral tribunal may require a party to provide appropriate security in connection with a measure ordered under sub-section (1).

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CHAPTER V Conduct of arbitral proceedings 18. Equal treatment of parties.- The parties shall be treated with equality and each party shall be given a full opportunity to present his case. 19. Determination of rules of procedure1) The arbitral tribunal shall not be bound by the Code of Civil Procedure, 1908 or the Indian Evidence Act, 1872. 2) Subject to this Part, the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting its proceedings. 3) Failing any agreement referred to in sub-section (2), the arbitral tribunal may, subject to this Part, conduct the proceedings in the manner it considers appropriate. 4) The power of the arbitral tribunal under sub-section (3) includes the power to determine the admissibility, relevance, materiality and weight of any evidence. 20. Place of arbitration1) The parties are free to agree on the place of arbitration. 2) Failing any agreement referred to in sub-section (1), the place of arbitration shall be determined by the arbitral tribunal having regard to the circumstances of the case, including the convenience of the parties. 3) Notwithstanding sub-section (1) or sub-section (2), the arbitral tribunal may, unless otherwise agreed by the parties, meet at any place it considers appropriate for consultation among its members, for hearing winners, experts or the parties, or for inspection of documents, goods or other property. 21. Commencement of arbitral proceedings.- Unless otherwise agreed by the parties, the arbitral proceedings, in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent. 22. Language1) The parties are free to agree upon the language or languages to is used in the arbitral proceedings. 2) Failing any agreement referred to in sub-section (1), the arbitral tribunal shall determine the language or languages to be used in the arbitral proceedings. 3) The agreement or determination, unless otherwise specified, shall apply to any written statement by a party, any hearing and any arbitral award, decision or other communication by the arbitral tribunal. 4) The arbitral tribunal may order that any documentary evidence shall be accompanied by a translation into the languages agreed upon by the parties or determined by the arbitral tribunal. 23. Statements of claim and defence.1) Within the period of time agreed upon by the parties or determined by the arbitral tribunal, the claimant shall state the facts supporting his claim, the points at issue and the relief or remedy sought, and the respondent shall state his defence in respect of these particulars, unless the parties have otherwise agreed as to the required elements of those statements. 2) The parties may submit with their statements all documents they consider to be relevant or may add a reference to the documents or other evidence they will submit.

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3) Unless otherwise agreed by the parties, either party may amend or supplement his claim or defence during the course of the arbitral proceedings, unless the arbitral tribunal considers it inappropriate to allow the amendment or supplement having regard to the delay in making it. 24. Hearings and written proceedings.1) Unless otherwise agreed by the parties, the arbitral tribunal shall decide whether to hold oral hearings for the presentation of evidence or for oral argument, or whether the proceedings shall be conducted on the basis of documents an other materials; Provided that the arbitral tribunal shall hold hearings, at an appropriate stage of the proceedings, on a request by a party, unless the parties have agreed that no oral hearing shall be held. 2) The parties shall be given sufficient advance notice of any hearing and of any meeting of the arbitral tribunal for the purposes of inspection of documents, goods or other property. 3) All statements, documents or other information supplied to, or applications made to, the arbitral tribunal by one party shall be communicated to the other party, and any expert report or evidentiary document on which the arbitral tribunal may rely in making its decision shall be communicated to the parties. 25. Default of a party- Unless otherwise agreed by the parties, where, without showing sufficient cause: a) the claimant fails to communicate his statement of claim in accordance with sub-section (1) of section 23, the arbitral tribunal shall terminate the proceedings; (b) The respondent fails to communicate his statement of defence in accordance with sub-section (1) of section 23, the arbitral tribunal shall continue the proceedings without treating that failure in itself as an admission of the allegations by the claimant. (c) A party fails to appear at an oral hearing or to produce documentary evidence, the arbitral tribunal may continue the proceedings and make the arbitral award on the evidence before it. 26. Expert appointed by arbitral tribunal.1) Unless otherwise agreed by the parties, the arbitral tribunal may--(a) Appoint one or more experts to report to it on specific issues to be determined by the arbitral tribunal, and (b) Require a party to give the expert any relevant information or to produce, or to provide access to, any relevant documents, goods or other property for his inspection. 2) Unless otherwise agreed by the parties, if a party so requests or if the arbitral tribunal considers it necessary, the expert shall, after delivery of his written or oral report, participate on an oral hearing where the parties have the opportunity to put questions to him and to present expert witnesses in order to testify on the points at issue. 3) Unless otherwise agreed by the parties, the expert shall, on the request of a party, make available to that party for examination all documents, goods or other property in the possession of the expert with which he was provided in order to prepare his report. 27. Court assistance in taking evidence.1) The arbitral tribunal, or a party with the approval of the arbitral tribunal, may apply to the Court for assistance in taking evidence.

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2) The application shall specify(a) The names and addresses of the parties and the arbitrators. (b) the general nature of the claim and the relief sought; (c) The evidence to the obtained, in particular, (i) The name and address of any person to be heard as witness or expert witness and a statement of the subject-matter of the testimony required; (ii) The description of an document to be produced or property to be inspected. 3) The Court may, within its competence and according to its rules on taking evidence, execute the request or ordering that the evidence be provided directly to the arbitral tribunal. 4) The Court may, while making or order under sub-section (3), issue the same processes to witnesses as it may issue in suits tried before it. 5) Persons failing to attend in accordance with such process, or making any other fault, or refusing to give their evidence, or guilty of any contempt to the arbitral tribunal during the conduct of arbitral proceedings, shall be subject to the like disadvantages, penalties and punishments by order of the Court on the representation of the arbitral tribunal as they would incur for the like offences is suits tried before the Court. 6) In this section the expression "Processes" includes summonses and commissions for the examination of witnesses and summonses to produce documents. CHAPTER VI Making of arbitral award and termination of proceedings 28. Rules applicable to substance of dispute.1) Where the place of arbitration is situate in India,(a) In an arbitration other than an international commercial arbitration, the arbitral tribunal shall decide the dispute submitted to arbitration in accordance with the substantive law for the time being in force in India; b) In international commercial arbitration,i) The arbitral tribunal shall decided the dispute in accordance with the rules of law designated by the parties as applicable to the substance of the dispute; ii) any designation by the parties of the law or legal system of a given country shall be construed, unless otherwise expressed, as directly referring to the substantive law of that country and not to its conflict of laws rules; iii) Failing any designation of the law under clause (a) by the parties, the arbitral tribunal shall apply the rules of law it considers to be appropriate given all the circumstances surrounding the dispute. 2) The arbitral tribunal shall decide ex aequo et bono or as amiable compositeur only if the parties have expressly authorised it to do so. 3) In all cases, the arbitral tribunal shall decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction. 29. Decision making by panel of arbitrators1) Unless otherwise agreed by the parties, in arbitral proceedings with more than one arbitrator, any decision of the arbitral tribunal shall be made by a majority of all its members. 2) Notwithstanding sub-section (1), if authorised by the parties or all the members of the arbitral tribunal, questions of procedure may be decided by the presiding arbitrator.

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30. Settlement1) It is not incompatible with an arbitration agreement for an arbitral tribunal to encourage settlement of the dispute and, with the agreement of the parties, the arbitral tribunal may use mediation, conciliation or other procedures at any time during the arbitral proceedings to encourage settlement. 2) If, during arbitral proceedings, the parties settle the dispute, the arbitral tribunal shall terminate the proceedings and, if requested by the parties and not objected to by the arbitral tribunal, record the settlement in the form of an arbitral award on agreed terms. 3) An arbitral award on agreed terms shall be made in accordance with section 31 and shall state that it is an arbitral award. 4) An arbitral award on agreed terms shall have the same status and effect as any other arbitral award on the substance of the dispute. 31. Form and contents of arbitral award: 1) An arbitral award shall be made in writing and shall be signed by the members of the arbitral tribunal. 2) For the purposes of sub-section (1), in arbitral proceedings with more than one arbitrator, the signatures of the majority of all the members of the arbitral tribunal shall be sufficient so long as the reason for any omitted signature is stated. 3) The arbitral award shall state the reasons upon which it is based, unless: (a) The parties have agreed that no reasons are to be given, or (b) The award is an arbitral award on agreed terms under section 30. 4) The arbitral award shall state its date and the place of arbitration as determined in accordance with section 20 and the award shall be deemed to have been made at that place. 5) After the arbitral award is made, a signed copy shall be delivered to each party. 6) The arbitral tribunal may, at any time during the arbitral proceedings, make an interim arbitral award on any matter with respect to which it may make a final arbitral award. 7) (a) Unless otherwise agreed by the parties, where and in so far as an arbitral award is for the payment of money, the arbitral tribunal may include in the sum for which the award is made interest, at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made. (b) A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of eighteen per centum per annum from the date of the award to the date of payment. 8) Unless otherwise agreed by the parties,(a) The costs of an arbitration shall be fixed by the arbitral tribunal; (b) The arbitral tribunal shall specify(i) The party entitled to costs, (ii) The party who shall pay the costs, (iii) The amount of costs or method of determining that amount, and (iv) The manner in which the costs shall be paid. Explanation.-For the purpose of clause (a), "costs" means reasonable costs relating to---(i) The fees and expenses of the arbitrators and witnesses, (ii) Legal fees and expenses, (iii) Any administration fees of the institution supervising the arbitration, and (iv) Any other expenses incurred in connection with the arbitral proceedings and the arbitral award.

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32. Termination of proceedings.1) The arbitral proceedings shall be terminated by the final arbitral award or by an order of the arbitral tribunal under sub-section (2). 2) The arbitral tribunal shall issue an order for the termination of the arbitral proceedings where: (a) The claimant withdraws his claim, unless the respondent objects to the order and the arbitral tribunal recognises a legitimate interest on his part in obtaining a final settlement of the dispute, (b) The parties agree on the termination of the proceedings, or (c) The arbitral tribunal finds that the continuation of the proceedings has for any other reason become unnecessary or impossible. 3) Subject to section 33 and sub-section (4) of section 34, the mandate of the arbitral tribunal shall terminate with the termination of the arbitral proceedings. 33. Correction and interpretation of award; additional award.- (1) Within thirty days from the receipt of the arbitral award, unless another period of time has been agreed upon by the parties: (a) A party, with notice to the other party, may request the arbitral tribunal to correct any computation errors, any electrical or typographical errors or any other errors of a similar nature occurring in the award; (b) If so agreed by the parties, a party, with notice to the other party, may request the arbitral tribunal to give an interpretation of a specific point or part of the award. 2) If the arbitral tribunal considers the request made under sub-section (1) to be justified, it shall make the correction or give the interpretation within thirty days from the receipt of the request and the interpretation shall form part of the arbitral award. 3) The arbitral tribunal may correct and error of the type referred to in clause (a) of subsection (1), on its own initiative, within thirty days from the date of the arbitral award. 4) Unless otherwise agreed by the parties, a party with notice to the other party, may request, within thirty days from the receipt of the arbitral award, the arbitral tribunal to make an additional arbitral award as so claims presented in the arbitral proceedings but omitted from the arbitral award. 5) If the arbitral tribunal considers the request made under sub-section (4) to be justified, it shall make the additional arbitral award within sixty days from the receipt of such request. 6) The arbitral tribunal may extend, if necessary, the period of time within which it shall make a correction, give an interpretation or make an additional arbitral award under subsection (2) or sub-section (5). 7) Section 31 shall apply to a correction or interpretation of the arbitral award or to an additional arbitral award made under this section. CHAPTER VII Recourse against arbitral award 34. Application for setting aside arbitral award: (1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3). 2) An arbitral award may be set aside by the Court only if: (a) The party making the application furnishes proof that: (i) A party was under some incapacity, or

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(ii) The arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or (iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or (iv) The arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matter beyond the scope of the submission to arbitration: Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or (v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or The Court finds that(i) The subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or (ii) The arbitral award is in conflict with the public policy of India.

Explanation.-Without prejudice to the generality of sub-clause (ii), it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81. 3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal: Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months if may entertain the application within a further period of thirty days, but not thereafter. 4) On receipt of an application under sub-section (1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award. CHAPTER VIII Finality and enforcement of arbitral awards 35. Finality of arbitral awards.- Subject to this Part an arbitral award shall be final and binding on the parties and persons claiming under them respectively. 36.Enforcement.- Where the time for making an application to set aside the arbitral award under award shall be endorsed under the Code of Civil Procedure, 1908 (5 of 1908) in the same manner as if it were a decree of the Court.

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CHAPTER IX Appeals 37. Appealable orders.1) An appeal shall lie from the following orders (and from no others) to the Court authorised by law to hear appeals from original decrees of the Court passing the order, namely: (a) Granting or refusing to grant any measure under section 9: (b) Setting aside or refusing to set aside an arbitral award under section 34. 2) Appeal shall also lie to a court from an order of the arbitral tribunal---(a) Accepting the plea referred to in sub-section (2) or sub-section (3) of section 16; or (b) Granting or refusing to grant an interim measure under section 17. 3) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or taken away any right to appeal to the Supreme Court. CHAPTER X Miscellaneous 38. Deposits.1) The arbitral tribunal may fix the amount of the deposit or supplementary deposit, on the case may be, as an advance for the costs referred to in sub-section (8) of section 31, which it expects will be incurred in respect of the claim submitted to it: Provided that where, apart from the claim, a counter-claim has been submitted to the arbitral tribunal, it may fix separate amount of deposit for the claim and counter-claim. 2) The deposit referred to in sub-section (1) shall be payable in equal shares by the parties: Provided that where one party fails to pay his share of the deposit, the other party may pay that share: Provided further that where the other party also does not pay the aforesaid share in respect of the claim or the counter-claim, the arbitral tribunal may suspend or terminate the arbitral proceedings in respect of such claim or counter-claim, as the case may be. 3) Upon termination of the arbitral proceedings, the arbitral tribunal shall render an accounting to the parties of the deposits received and shall return any unexpended balance to the party or parties, as the case may be. 39. Lien on arbitral award and deposits as to costs.1) Subject to the provisions of sub-section (2) and to any provision to the contrary in the arbitration, agreement, the arbitral tribunal shall have a lien on the arbitral award for any unpaid costs of the arbitration. 2) If in any case an arbitral tribunal refuses to deliver its award except on payment of the costs demanded by it, the Court may, on an application in this behalf, order that the arbitral tribunal shall deliver the arbitral award to the applicant on payment into Court by the applicant of the costs demanded, and shall, after such inquiry, in any, as it thinks, fit, further order that out of the money so paid into Court there shall be paid to the arbitral tribunal by way of costs such sum as the Court may consider reasonable and that the balance of the money, if any, shall be refunded to the applicant. 3) An application under sub-section (2) may be made by any party unless the fees demanded have been fixed by written agreement between him and the arbitral tribunal, and the arbitral tribunal shall be entitled to appear and be heard on any such application.

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4) The Court may make such orders as it thinks fit respecting the costs of the arbitration where any question arises respecting such costs and the arbitral award contains no sufficient provision concerning them. 40. Arbitration agreement not to be discharged by death of party thereto1) An arbitration agreement shall not be discharged by the death of any party thereto either as respects the deceased or as respects any other party, but shall in such event by enforceable by or against the legal representative of the deceased. 2) The mandate of an arbitrator shall not be terminated by the death of any party by whom he was appointed. 3) Nothing in this section shall affect the operation of any law by virtue of which any right of action is extinguished by the death of a person. 41. Provisions in case of insolvency1) Where it is provided by a term in a contract to which an insolvent is a party that any dispute arising thereout or in connection therewith shall be submitted to arbitration, the said term shall, if the receiver adopts the contract, be enforceable by or against him so far as it relates to any such dispute. 2) Where a person who has been adjudged an insolvent had, before the commencement of the insolvency proceedings, become a party to a arbitration agreement, and any matter to which the agreement applies is required to be determined in connection with, or for the purposes of, the insolvency proceedings. then, if the case is one to which sub-section (1) does not apply, any other party or the receiver may apply to the judicial authority having jurisdiction in the insolvency proceedings for an order directing that the matter in question shall be submitted to arbitration in accordance with the arbitration agreement , and the judicial authority may, if it is of opinion that, having regard to all the circumstances of the case, the matter ought to be determined by arbitration, make an order accordingly. 3) In this section the expression "receiver" includes an Official Assignee. 42. Jurisdiction- Notwithstanding anything contained elsewhere in this Part or in any other law for the time being in force, where with respect to an arbitration agreement any application under this Part has been made in a Court, that Court alone shall have jurisdiction over the arbitral proceedings and all subsequent applications arising out of that agreement and the arbitral proceedings shall be made in that Court and in no other Court. 43. Limitations.1) The Limitation Act, 1963 (36 of 1963), shall, apply to arbitrations as it applies to proceedings in court. 2) For the purposes of this section and the Limitation Act, 1963 (36 of 1963), an arbitration shall be deemed to have commenced on the date referred in section 21. 3) Where an arbitration agreement to submit further disputes to arbitration provides that any claim to which the agreement applies shall be barred unless some step to commence arbitral proceedings is taken within a time fixed by the agreement, and a dispute arises to which the agreement applies the Court, if it is of opinion that in the circumstances of the case undue hardship would otherwise be caused, and notwithstanding that the time so fixed has expired, may on such terms, if any, as the justice of the case may require, extend the time for such period as it thinks proper. 4) Where the Court orders that an arbitral award be set aside, the period between the commencement of the arbitration and the date of the order of the Court shall be excluded

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in computing the time prescribed by the Limitation Act, 1963 (36 of 1963), for the commencement of the proceedings (including arbitration) with respect to the dispute so submitted. PART II - ENFORCEMENT OF CERTAIN FOREIGN AWARDS - CHAPTER I New York Convention Awards 44.Definition.- In this Chapter, unless the context otherwise requires, "foreign award" means an arbitral award on differences between persons arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India, made on or after the 11th day of October, 1960(a) in pursuance of an agreement in writing for arbitration to which the Convention set forth in the First Schedule applies, and (b) in one of such territories as the Central Government, being satisfied that reciprocal provisions have been made may, by notification in the Official Gazette, declare to be territories to which the said Convention applies. 45. Power of judicial authority to refer parties to arbitration.- Notwithstanding anything contained in Part I or in the Code of Civil Procedure, 1908 (5 of 1908), a judicial authority, when seized of an action in a matter in respect of which the parties have made an agreement referred to in section 44, shall, at the request of one of the parties or any person claiming through or under him, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed. 46. When foreign award binding.- Any foreign award which would be enforceable under this Chapter shall be treated as binding for all purposes on the persons as between whom it was made, and may accordingly be relied on by any of those persons by way of defence, set off or otherwise in any legal proceedings in India and any references in this Chapter to enforcing a foreign award shall be construed as including references to relying on an award. 47. Evidence1) The party applying for the enforcement of a foreign award shall, at the time of the application, produce before the court(a) The original award or a copy thereof, duly authenticated in the manner required by the law of the country in which it was made; (b) The original agreement for arbitration or a duly certified copy thereof; and (c) Such evidence as may be necessary to prove that the aware is a foreign award. 2) If the award or agreement to be produced under sub-section (1) is in a foreign language, the party seeking to enforce the award shall produce a translation into English certified as correct by a diplomatic or consular agent of the country to which that party belongs or certified as correct in such other manner as may be sufficient according to the law in force in India. Explanation-In this section and all the following sections of this Chapter, "Court" means the principal Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction over the subjectmatter of the award if the same had been the subject-matter of a suit, but does not include any civil court of a grade inferior to such principal Civil Court, or any Court of Small Causes.

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48. Conditions for enforcement of foreign awards.1) Enforcement of a foreign award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the court proof that(a) the parties to the agreement referred to in section 44 were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or (b) The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or (c) The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration. Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be enforced; or (d) The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place ; or (e) The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made. 2) Enforcement of an arbitral award may also be refused if the court finds that(a) The subject -matter of the difference is not capable of settlement by arbitration under the law of India; or (b) The enforcement of the award would be contrary to the public policy of India. Explanation-Without prejudice to the generality of clause (b), it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption. 3) If an application for the setting aside or suspension of the award has been made to a competent authority referred to in clause (e) of sub-section (1) the Court may, if it considers it proper, adjourn the decision on the enforcement of the award and may also , on the application of the party claiming enforcement of the award, order the other party to give suitable security. 49. Enforcement of foreign awards.- Where the Court is satisfied that the foreign award is enforceable under this Chapter, the award shall be deemed to be a decree of that Court. 50. Appealable orders1) An appeal shall lie from the order refusing to--(a) refer the parties to arbitration under section 45; (b) enforce a foreign award under section 48, to the court authorised by law to hear appeals from such order. 2) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court.

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51. Saving- Nothing in this Chapter shall prejudice any rights which any person would have had of enforcing in India of any award or of availing himself in India of any award or of availing himself in India of any award if this Chapter had not been enacted. 52. Chapter II not to apply- Chapter II of this Part shall not apply in relation to foreign awards to which this Chapter applies. CHAPTER II Geneva Convention Awards 53. Interpretation.- In this Chapter "foreign award" means an arbitral award on differences relating to matters considered as commercial under the law in force in India made after the 28th day of July, 1924,: (a) In pursuance of an agreement for arbitration to which the Protocol set forth in the Second Schedule applies, and (b) between persons of whom one is subject to the jurisdiction of some one of such Powers as the Central Government, being satisfied that reciprocal provisions have been made, may, by notification in the Official Gazette, declare to be parties to the Convention set forth in the Third Schedule, and of whom the other is subject to the jurisdiction of some other of the Powers aforesaid, and (c) in one of such territories as the Central Government, being satisfied that reciprocal provisions have been made, may, by like notification, declare to be territories to which the said Convention applies, and for the purposes of this Chapter an award shall not be deemed to be final if any proceedings for the purpose of contesting the validity of the award are pending in the country in which it was made. 54. Power of judicial authority to refer parties to arbitration.- Notwithstanding anything contained in Part I or in the Code of Civil Procedure, 1908 (5 of 1908), a judicial authority, on being seized of a dispute regarding a contract made between persons to whom section 53 applies and including an arbitration agreement, whether referring to present or further differences, which is valid under that section and capable of being carried into effect, shall refer the parties on the application of either of them or any person claiming through or under him to the decision of the arbitrators and such reference shall not prejudice the competence of the judicial authority in case the agreement or the arbitration cannot proceed or becomes inoperative. 55. Foreign awards when binding.- Any foreign award which would be enforceable under this Chapter shall be treated as binding for all purposes on the persons as between whom it was made, and may accordingly be relied on by any of those persons by way of defence, set off or otherwise in any legal proceedings in India and any references in this Chapter to enforcing a foreign award shall be construed as including references to relying on an award. 56. Evidence1) The party applying for the enforcement of a foreign award shall, at the time of application procedure before the Court(a) the original award or a copy thereof duly authenticated in the manner required by the law of the country in which it was made; (b) evidence proving that the award has become final; and

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such evidence as may be necessary to prove that the conditions mentioned in clauses (a) and (c) of sub-section (1) of section 57 are satisfied. 2) Where any document requiring to be produced under sub-section (1) is in a foreign language, the party seeking to enforce the award shall produce a translation into English certified as correct by a diplomatic or consular agent of the country to which that party belongs or certified as correct in such other manner as may be sufficient according to the law in force in India. Explanation-In this section and all the following sections of this Chapter, "Court" means the principal Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction over the subjectmatter of the award if the same had been the subject matter of a suit, but does not include any civil court of a grade inferior to such principal Civil Court, or any Court of Small Causes. 57. Conditions for enforcement of foreign awards.1) In order that a foreign award may be enforceable under this Chapter, it shall be necessary that--(a) The award has been made in pursuance of a submission to arbitration which is valid under the law applicable thereto; (b) The subject-matter of the award is capable of settlement by arbitration under the law of India; (c) The award has been made by the arbitral tribunal provided for in the submission to arbitration or constituted in the manner agreed upon by the parties and in conformity with the law governing the arbitration procedure; (d) the award has become final in the country in which it has been made, in the sense that it will not be considered as such if it is open to opposition or appeal or if it is proved that any proceedings for the purpose of contesting the validity of the award the pending; (e) the enforcement of the award is not contrary to the public policy or the law of India. Explanation- Without prejudice to the generality of clause (e), it is hereby declared, for the avoidance, of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption. 2) Even if the conditions laid down in sub-section (1) are fulfilled, enforcement of the award shall be refused if the Court is satisfied that(a) The award has been annulled in the country in which it was made; (b) The party against whom it is sought to use the award was not given notice of the arbitration proceedings in sufficient time to enable him to present his case; or that, being under a legal incapacity, he was not properly represented; (c) the award does not deal with the differences contemplated by or falling within the terms of the submission to arbitration or that it contains decisions on matters beyond the scope for the submission or arbitration; Provided that if the award has not covered all the differences submitted to the arbitral tribunal, the Court may, if it thinks fit, postpone such enforcement or grant it subject to such guarantee as the Court may decide. 3) If the party against whom the award has been made proves that under the law governing the arbitration procedure there is a ground, other than the grounds referred to in

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clauses (a) and (c) of sub-section (1) and clauses (b) and (c) of sub-section (2) entitling him to contest the validity of the award, the Court may, if it thinks fit, either refuse enforcement of the award or adjourn the consideration thereof, giving such party a reasonable time within which to have the award annulled by the competent tribunal. 58. Enforcement of foreign awards- Where the Court is satisfied that the foreign award is enforceable under this Chapter, the award shall be deemed to be a decree of the Court. 59. Appealable orders1) An appeal shall lie from the order refusing(a) To refer the parties to arbitration under section 54: and (b) To enforce a foreign award under section 57, 2) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court. 60. Saving- Nothing in this Chapter shall prejudice any rights which any person would have had of enforcing in India of any award or of availing himself in India of any award if this Chapter had not been enacted. 61. Application and scope.1) Save as otherwise provided by any law for the time being in force and unless the parties have otherwise agreed, this Part shall apply to conciliation of disputes arising out of legal relationship, whether contractual or not and to all proceedings relating thereto. 2) This Part shall not apply where by virtue of any law for the time being in force certain disputes may not be submitted to conciliation. 62. Commencement of conciliation proceedings.1) The party initiating conciliation shall send to the other party a written invitation to conciliate under this Part, briefly identifying the subject of the dispute. 2) Conciliation proceedings shall commence when the other party accepts in writing the invitation to conciliate. 3) If the other party rejects the invitation, there will be no conciliation proceedings. 4) If the party initiating conciliation does not receive a reply within thirty days from the date on which he sends the invitation, or within such other period of time as specified in the invitation, be may elect to treat this as a rejection of the invitation to conciliate and if he so elects, he shall inform in writing the other party accordingly. 63. Number of conciliators1) There shall be one conciliator unless the parties agree that there shall be two or three conciliators. 2) Where there is more than one conciliator, they ought, as a general rule, to act jointly. 64. Appointment of conciliators.1) Subject to sub-section (2)(a) In conciliation proceedings with one conciliator, the parties may agree on the name of a sole conciliator; (b) In conciliation proceedings with two conciliators, each party may appoint one conciliator;

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(c)

In conciliation proceedings with three conciliators, each party may appoint one conciliator and the parties may agree on the name of the third conciliator who shall act as the presiding conciliator. 2) Parties may enlist the assistance of a suitable institution or person in connection with the appointment of conciliators and in particular,(a) A party may request such an institution or person to recommend the names of suitable individuals to act as conciliator; or (b) the parties may agree that the appointment of one or more conciliators be made directly by such an institution or person; Provided that in recommending or appointing individuals to act as conciliator, the institution or person shall have regard to such considerations as are likely to secure the appointment of an independent and impartial conciliator and, with respect to a sole or third conciliator, shall take into account the advisability of appointing a conciliator of a nationality other than the nationalities of the parties. 65. Submission of statements to conciliator.1) The conciliator, upon his appointment, may request each party to submit to him a brief written statement of his position and the facts and grounds in support thereof, supplement by any documents and other evidence that such party deems appropriate. The party shall send a copy of such statement, documents and other evidence to the other party. 2) The Conciliator may request each party to submit to him a further written statement of his position and the facts and grounds in support thereof, supplemented by any documents and other evidence that such party deems appropriate. The party shall send a copy of such statement, documents and other evidence to the other party. 3) At any stage of the conciliation proceedings, the conciliator may request a party to submit to him such additional information as he deems appropriate. Explanation-In this section and all the following sections of this Part, the term "conciliator" applies to a sole conciliator, to or three conciliators as the case may be. 66. Conciliator not bound by certain enactments- The conciliator is not bound by the Code of Civil Procedure, 1908 (5 of 1908) or the Indian Evidence Act, 1872 (1 of 1872). 67. Role of conciliator1) The conciliator shall assist the parties in an independent and impartial manner in their attempt to reach an amicable settlement of their dispute. 2) The conciliator shall be guided by principles of objectivity, fairness and justice, giving consideration to, among other things, the rights and obligations of the parties, the usages of the trade concerned and the circumstances surrounding the dispute, including any previous business practices between the parties. 3) The conciliator may conduct the conciliation proceedings in such a manner as he considers appropriate, taking into account the circumstances of the case, the wishes the parties may express, including any request by a party that the conciliator hear oral statements, and the need for a speedy settlement of the dispute. 4) The conciliator-may, at any stage of the conciliation proceedings, make proposals for a settlement of the dispute. Such proposals need not be writing and need not be accompanied by a statement of the reasons there for.

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68. Administrative assistance- In order to facilitate the conduct of the conciliation proceedings, the parties, or the conciliator with the consent of the parties, may arrange for administrative assistance by a suitable institution or person. 69. Communication between conciliator and parties.1) The conciliator may invite the parties to meet him or may communicate with them orally or in writing. He may meet or communicate with the parties together or with each of them separately. 2) Unless the parties have agreed upon the place where meetings with the conciliator are to be held, such place shall be determined by the conciliator, after consultation with the parties, having regard to the circumstances of the conciliation proceedings. 70. Disclosure of information- When the conciliator receives factual information concerning the dispute from a party, he shall disclose the substance of that information to the other party in order that the other party may have the opportunity to present any explanation which he considers appropriate: Provided that when a party gives any information to the conciliator subject to a specific condition that it be kept confidential, con conciliator shall not disclose that information to the other party. 71. Co-operation of parties with conciliator- The parties shall in good faith co-operate with the conciliator and, in particular, shall endeavour to comply with requests by the conciliator to submit written materials, provide evidence and attend meetings. 72. Suggestions by parties for settlement of dispute- Each party may, on his own initiative or at the invitation of the conciliator, submit to the conciliator suggestions for the settlement of the dispute. 73. Settlement agreement1) When it appears to the conciliator that there exist elements of a settlement which may be acceptable to the parties, he shall formulate the terms of a possible settlement and submit them to the parties for their observations. After receiving the observations of the parties, the conciliator may reformulate the terms of a possible settlement in the light of such observations. 2) If the parties reach agreement on a settlement of the dispute, they may draw up and sign a written settlement agreement. If requested by the parties, the conciliator may draw up, or assist the parties in drawing up, the settlement agreement. 3) When the parties sign the settlement agreement, it shall be final and binding on the parties and persons claiming under them respectively. 4) The conciliator shall authenticate the settlement agreement and furnish a copy thereof to each of the parties. 74. Status and effect of settlement agreement- The settlement agreement shall have the and effect as if it is an arbitral award on agreed terms on the substance of the dispute rendered by an arbitral tribunal under section 30. 75. Confidentiality.- Notwithstanding anything contained in any other law for the time being in force, the conciliator and the parties shall keep confidential all matter relating to the conciliation proceedings. Confidentiality shall extend also to the settlement agreement, except where its disclosure is necessary for purposes of implementation and enforcement.

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76. Termination of conciliation proceedings- The conciliation proceedings shall be terminated: (a) By the signing of the settlement agreement by the parties; on the date of the agreement; or (b) by a written declaration of the conciliator, after consultation with the parties, in the effect that further efforts at conciliation are no longer justified, on the date of the declaration; or (c) By a written declaration of the parties addressed to the conciliator to the effect that the conciliation proceedings are terminated, on the date of the declaration; or (d) by a written declaration of a party to the other party and the conciliator, if appointed, to the effect that the conciliation proceedings are terminated, on the date of the declaration. 77. Resort to arbitral or judicial proceedings- The parties shall not initiate, during the conciliation proceedings, any arbitral or judicial proceedings in respect of a dispute that is the subject- matter of the conciliation proceedings except that a party may initiate arbitral or judicial proceedings, where, in his opinion, such proceedings are necessary for preserving his rights. 78. Costs1) Upon termination of the conciliation proceedings, the conciliator shall fix the costs of the conciliation and given written notice thereof to the parties. 2) For the purpose of sub-section (1), "costs" means reasonable costs relating to--(a) The fee and expenses of the conciliator and witnesses requested by the conciliator, with the consent of the parties; (b) Any expert advice requested by the conciliator with the consent of the parties; (c) Any assistance provided pursuant to clause (b) of sub-section (2) of section 64 and section 68. (d) Any other expenses incurred in connection with the conciliation proceedings and the settlement agreement. 3) The costs shall be borne equally by the parties unless the settlement agreement provides for a different appointment. All other expenses incurred by a party shall be borne by that party. 79 Deposits1) The conciliator may direct each party to deposit an equal amount as an advance for the costs referred to in subsection (2) of section 78 which he expects will be incurred. 2) During the course of the conciliation proceedings, the conciliator may direct supplementary deposits in an equal amount from each party. 3) If the required deposits under sub-sections (1) and (2) are not paid in full by both parties within thirty days, the conciliator may suspend the proceedings or may make a written declaration of termination of the proceedings to the parties, effective on the date of that declaration. 4) Upon termination of the conciliation proceedings the conciliator shall render an accounting to the parties of the deposits received and shall return and expended balance to the parties. 80. Role of conciliator in other proceedings.- Unless otherwise agreed by the parties:-

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a) The conciliator shall not act as an arbitrator or as a representative or counsel of a party in any arbitral or judicial proceeding in respect of a dispute that is the subject of the conciliation proceedings; The conciliator shall not be presented by the parties as a witness in any arbitral or judicial proceedings.

b)

81. Admissibility of evidence in other proceedings.- The parties shall not rely on or introduce as evidence in arbitral or judicial proceedings, whether or not such proceedings relate to the dispute that is the subject of the conciliation proceedings,a) views expressed or suggestions made by the other party in respect of a possible settlement of the dispute; b) Admissions made by the other party in the course of the conciliation proceedings; c) Proposals made by the conciliator; d) The fact that the other party had indicated to accept a proposal for settlement made by the conciliator. PART IV - SUPPLEMENTARY PROVISIONS 82. Power of High Court to make rules- The High court may make rules consistent with this Act as to all proceedings before the court under this Act. 83. Removal of difficulties1) If any difficulty arises in giving effect to the provisions of this Act, the central Government may, by order published in the Official Gazette, make such provisions, not inconsistent with the provisions of this Act as appear to it to be necessary or expedient for removing the difficulty: Provided that no such order shall be after the expiry of a period of two years from the date of commencement of this Act. 2) Every order made under this section shall, as soon as may be after it is made, be laid before each Houses of Parliament. 84. Power to make rules1) The Central Government may, by notification in the Official Gazette, make rules for carrying out the provisions of this Act. 2) Every rule made by the Central Government under this Act shall be laid, as soon as may be, after it is made before each House of Parliament while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making may modification in the rule or both Houses agree that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule. 85. Repeal and savings1) The Arbitration (Protocol and Convention) Act, 1937 (6 of 1937), the Arbitration Act, 1940 (10 of 1940) and the Foreign Awards (Recognition and Enforcement) Act, 1961 (45 of 1961) are hereby repealed. 2) Notwithstanding such repeal,(a) the provisions of the said enactments shall apply in relation to arbitral proceedings which commenced before this Act came into force unless

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otherwise agreed by the parties but this Act shall apply in relation to arbitral proceedings which commenced on or after this Act comes into force; (b) All rules made and notifications published, under the said enactments shall, to the extent to which they are not repugnant to this Act, be deemed respectively to have been made or issued under this Act, 86. Repeal of Ordinance 27 of 1996 and saving.- (1) The Arbitration and Conciliation (Third) Ordinance, 1996 (Ord.27 of 1996) is hereby repealed, done or any action taken in pursuance of any provision of the said Ordinance shall be deemed to have been made, done or taken under the corresponding provisions of this Act. THE FIRST SCHEDULE (See section 44) CONVENTION ON THE RECOGNITION AND EXPORCEMENT OF FOREIGN ARBITRAL AWARDS ARTICLE 1 1. This Convention shall apply to the recognition and enforcement of arbitral awards made in the territory of a State other than the State where the recognition and enforcement of such awards are sought and arising out of differences between persons, whether physical or legal. It shall also apply to arbitral awards not considered as domestic awards in the State where their recognition and enforcement are sought. 2. The term "arbitral awards" shall include not only awards made by arbitrators appointed for each case but also those made by permanent arbitral bodies to which the parties have submitted. 3.When signing, ratifying or acceding to this Convention, or notifying extension under article X hereof, and State may on the basis of reciprocity declare that it will apply the Convention to the recognition and enforcement of awards made only in the territory of another Contracting State. It may also declare that it will apply the Convention only to differences arising out of legal relationships, whether contractual or not, which are considered as commercial undertaking national law of the State making such declaration. ARTICLE II 1.Each Contracting State shall recognise an agreement in writing under which the parties undertaking to submit to arbitration all or any differences which have arisen or which may arise between them in respect of defined legal relationship, whether contractual or not, concerning a subject-matter capable of settlement by arbitration. 2. The term "agreement in writing" shall include an arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams. 3. The court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless in finds that the said agreement is null and void, inoperative of incapable of being performed. ARTICLE III Each Contracting State shall recognize arbitral awards as binding and enforcement them in accordance with the rules of procedure of the territory where the award is relied upon, under the conditions laid down in the following articles. There shall not be imposed substantially more onerous conditions or higher fees or charges on the recognition or enforcement of arbitral awards to which this Convention applies than are imposed on the recognition or enforcement of domestic arbitral awards.

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ARTICLE IV 1. To obtain the recognition and enforcement mentioned in the proceeding article, the party applying for recognition and enforcement shall, at the time of the application, supply: (a) The duly authenticated original award or a duly certified copy thereof: (b) The original agreement referred to in article II or a duly certified copy thereof. 2. If the said award or agreement is not made in an official language of the country in which the award is relied upon, the party applying for recognition and enforcement of the award shall produce a translation of these documents into such language. The translation shall be certified by an official or sworn translator or by a diplomatic or consular agent. ARTICLE V 1. Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that(a) the parties to the agreement referred to in article II were, under the law applicable to them, under some incapacity, or the said agreement in not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or (b) the party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case; or (c) the award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognised and enforced; or (d) the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or (e) The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made. 2. Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that(a) The subject matter of the difference is not capable of settlement by arbitration under the law of that country; or (b) The recognition or enforcement of the award would be contrary to the public policy of that country. ARTICLE VI If an application for the setting aside or suspension of the award has been made to a competent authority referred to in article V (1) (e), the authority before which the award is sought to be relied upon may, if it considers it proper, adjourn the decision on the enforcement of the award and may also, on the application of the party claiming enforcement of the award, order the other party to give suitable security.

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ARTICLE VII 1. The provisions of the present Convention shall not affect the validity of multilateral or bilateral agreements concerning the recognition and enforcement of arbitral awards entered into by the Contracting States nor deprive any interested party of any right he may have to avail himself of an arbitral award in the manner and to the extent allowed by the law or the treaties of the country where such award is sought to be relied upon. 2.The Geneva Protocol on Arbitration Clauses of 1923 and the Geneva Convention on the Execution of Foreign Arbitral Awards of 1927 shall cease to have effect between Contracting States on their becoming bound and to the extent that they become bound by this Convention. ARTICLE VIII 1. This Convention shall be upon until 31st December, 1958 for signature on behalf of any Member of the United Nations and also on behalf of any other State which is or hereafter becomes member of any specialised agency of the United Nations, or which is or hereafter becomes a party to the Statute of the International Court of Justice, or any other State to which an invitation has been addressed by the General Assembly of the United Nations. 2. This Convention shall be ratified and the instrument of ratification shall be deposited with the Secretary-General of the United Nations. ARTICLE IX 1. This Convention shall be upon for accession to all States referred to in article VIII. 2. Accession shall be effected by the deposit of an instrument of accession with the Secretary-General of the United Nations. ARTICLE X 1. Any State may, at the time of signature, ratification or accession, declare that this Convention shall extend to all or any of the territories for the international relations of which it is responsible. Such a declaration shall take effect when the Convention enters into force for the State concerned. 2. At any time thereafter any such extension shall be made by notification addressed to the Secretary-General of the United Nations and shall take effect as from the ninetieth day after the day of receipt by the Secretary-General of the United Nations of this notifications, or as from the date of entry into force of the Convention for the State concerned, whichever is the later. 3. With respect to those territories to which this Convention is not extended at the time of signature, ratification or accession, each State concerned shall consider the possibility of taking the necessary steps in order to extend the application of this Convention to such territories, subject, where necessary for constitutional reasons, to the consent of the Governments of such territories. ARTICLE XI In the case of a federal or non-unitary State, the following provisions shall apply: (a) with respect of those articles of this Convention that come within the legislative jurisdiction of the federal authority, the obligations of the federal Government shall to this extent be the same as those of Contracting States which are not federal States; (b) with respect to those articles of this Convention that come within the legislative jurisdiction of constituent States or provinces which are not, under the constitutional system of the federation, bound to take legislative action, the

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federal Government shall bring such articles with a favourable recommendation to the notice of the appropriate authorities of constituent States or provinces at the earliest possible moment; a federal State Party to this Convention shall, at the request of any other Contracting State transmitted through the Secretary- General of the United Nations, supply a statement of the law and practice of the federation and its constituent units in regard to any particular provision of this Convention, showing the extent to which effect has been given to that provision by legislative or other action.

(c)

ARTICLE XII 1. This Convention shall come into force on the ninetieth day following the date of deposit of the third instrument of ratification or accession. 2. For each State ratifying or acceding to this Convention after the deposit of the third instrument of ratification or accession, this Convention shall enter into force on the ninetieth day after deposit by such State of its instrument of ratification or accession. ARTICLE XIII 1. Any Contracting State may denounce this Convention by a written notification to the Secretary-General of the United Nations. Denunciation shall take effect one year after the date of receipt of the notification by the Secretary-General. 2. Any State which has made a declaration or notification under article X may, at any time thereafter, by notification to the Secretary- General of the United Nations, declare that this Convention shall cease to extend to the territory concerned one year after the date of the receipt of the notification by the Secretary-General. 3. This Convention shall continue to be applicable to arbitral awards in respect of which recognition or enforcement proceedings have been instituted before the denunciation takes effect. ARTICLE XIV A Contracting State shall not be entitled to avail itself of the present Convention against other Contracting States except to the extent that it is itself bound to apply the Convention. ARTICLE XV The Secretary General of the United Nations shall notify the States contemplated in article VIII of the following:(a) Signatures and ratifications in accordance with article VIII; (b) Accessions in accordance with article IX; (c) Declarations and notifications under articles I, X and XI; (d) The date upon which this Convention enters into force in accordance with article XII; (e) Denunciations and notifications in accordance with article XIII. ARTICLE XVI 1. This Convention, of which the Chinese, English, French, Russian and Spanish texts shall be equally authentic, shall be deposited in the archives of the United Nations. 2. The Secretary General of the United Nations shall transmit a certified copy of this Convention to the State contemplated in article XIII.

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THE SECOND SCHEDULE (See section 53) PROTOCOL ON ARBITRATION CLAUSES The undersigned, being duly authorised, declare that they accept, on behalf of the countries which they represent, the following provisions: 1. Each of the Contracting States recognises the validity of an agreement whether relating to existing or future differences between parties subject respectively to the jurisdiction of different Contracting States by which the parties to a contract agree to submit to arbitration all or any differences that may arise in connection with such contract relating to commercial matters or to any other matter capable of settlement by arbitration, whether or not the arbitration is to take place in a country to whose jurisdiction none of the parties is subject. Each Contracting State reserves the right to limit the obligation mentioned above to contracts which are considered as commercial under its national law. Any Contracting State which avails itself of this right will notify the Secretary-General of the League of Nations in order that the other Contracting States may be so informed. 2. The arbitral procedure, including the constitution of the Arbitral Tribunal, shall be governed by the will of the parties and by the law of the country in whose territory the arbitration takes place. The Contracting States agree to facilitate all steps in the procedure which require to be taken in their own territories, in accordance with the provisions of their law governing arbitral procedure applicable to existing differences. 3. Each Contracting State undertakes to endure the execution by its authorities and in accordance with the provisions of its national law of arbitral awards made in its own territory under the preceding articles. 4. The Tribunals of the Contracting Parties, on being seized of a dispute regarding a contract made between persons to whom Article I applies and including an Arbitration Agreement whether referring to present or further differences with is valid in virtue of the said article and capable of being carried into effect, shall refer the parties on the application of either of them to the decision of the Arbitrators. Such reference shall not prejudice the competence of he judicial tribunals in case the agreement or the arbitration cannot proceed or becomes inoperative. 5. The present Protocol, which shall remain open for signature by all States, shall be ratified. The ratification shall be deposited as soon as possible with the Secretary, General of the League of Nations, who shall notify such deposit to all the Signatory States. 6. The present Protocol will come into force as soon as two ratifications have been deposited. Thereafter it will take effect, in the case of each Contracting State, one month after the notification by the Secretary-General of the deposit of its ratification. 7. The present Protocol may be denounced by any Contracting State on giving one year's notice. Denunciation shall be effected by a notification addressed to the Secretary-General of the League, who will immediately transmit copies of such notification to all the other Signatory States and inform them of the date on which it was received. The denunciation shall take effect one year after the date on which it was notified to the Secretary-General, and shall operate only in respect of the notifying State. 8. he Contracting States may declare that their acceptance of the present Protocol does not include any or all of the under mentioned territories; that is to say, their colonies, overseas possessions or territories, protectorates or the territories over which they exercise a mandate. The said States may subsequently adhere separately on behalf of any territory thus excluded. The Secretary-General of the League of Nations shall be informed as soon as possible of such adhesions. He shall notify such adhesions to all Signatory States. They will take effect on month after the notification by the Secretary-General to all Signatory states. The Contracting States may also denounce the Protocol separately on behalf of any of the territories referred to above. Article 7 applies to such denunciation.

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THE THIRD SCHEDULE (See sections 53) CONVENTION ON THE EXECUTION OF FOREIGN ARBITRAL AWARDS ARTICLE 1 1) In the territories of any High Contracting Party to which the present Convention applies, an arbitral award made in pursuance of an agreement, whether relating the existing or future differences (hereinafter called "a submission to arbitration") covered by the Protocol on arbitration Clauses opened at Geneva on September 24th.1923, shall be recognised as binding and shall be enforced in accordance with the rules of the procedure of the territory where the award is relied upon, provided that the said award has been made in a territory of one of the High Contracting Parties to which the present Convention applies and between persons who are subject to the jurisdiction of one of the High Contracting Parties. 2) To obtain such recognition or enforcement, it shall, further, be necessary: (a) that the award has been made in pursuance of a submission to arbitration which is valid under the law applicable thereto; (b) that the subject-matter of the award is capable of settlement by arbitration under the law of the country in which the award is sought to be relied upon; (c) that the award has been made by the Arbitral Tribunal provided for in the submission to arbitration or constituted in the manner agreed upon by the parties and in conformity with the law governing the arbitration procedure; (d) that the award has become final in the country in which it has been made, in the sense that it will not be considered as such if it is open to opposition, appeal or pourvoien cassation (in the countries where such forms of procedure exist) or if it is proved that any proceedings for the purpose of contesting the validity of the award are pending; (e) That the recognition or enforcement of the award is not contrary to the public policy or to the principles of the law of the country in which it is sought to be relied upon. ARTICLE 2 Even if the conditions laid down in Article I hereof are fulfilled, recognition and enforcement of the award shall be refused if the Court is satisfied: (a) that the award has been annulled in the country in which it was made:--(b) that the party against whom it is sought to use the award was not given notice of the arbitration proceedings in sufficient time to enable him to present his case; or that, being under a legal incapacity, he was not properly represented; (c) That the award does not deal with the differences contemplated by or falling within the terms of the submission to arbitration or that it contains decisions on matters beyond the scope of the submission to arbitration. If the award has not covered all the questions submitted to the arbitral tribunal, the competent authority of the country where recognition or enforcement of the award is sought can, if it thinks fit , postpone such recognition or enforcement or grant it subject to such guarantee as that authority may decide. ARTICLE 3 If the party against whom the award has been made proves that, under the law governing the arbitration procedure, there is a ground, other than the grounds referred to in Article 1(a) and (c), and Article 2(b) and (c), entitling him to contest the validity of the award in a Court of Law, the Court may, if it thinks fit, either refuse recognition or enforcement of

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the award or adjourn the consideration thereof, giving such party a reasonable time within which to have the award annulled by the competent tribunal. ARTICLE 4 The party relying upon an award or claiming its enforcement must supply, in particular:-1) The original award or a copy thereof duly authenticated, according to the requirements of the law of the country in which it was made; 2) documentary or other evidence to prove that the award has become final, in the sense defined in Article 1 (d), in the country in which it was made; 3) When necessary, documentary or other evidence to prove that the conditions laid down in Article 1, Paragraph (1) and paragraph (2) (a) and (c), have been fulfilled. A translation of the award and of the award and of the other documents mentioned in this Article into the official language of the country where the award is sought to be relied upon may be demanded. Such translations must be certified correct by a diplomatic or consular agent of the country to which the party who seeks to rely upon the award belongs or by a sworn translator of the country where the award is sought to be relied upon. ARTICLE 5 The provisions of the above articles small not deprive any interested party of the right of availing himself of an arbitral award in the manner and to the extent allowed by the law or the treaties of the country where such award is sought to be relied upon. ARTICLE 6 The present Convention applies only to arbitral awards made after the coming into force of the Protocol on Arbitration Clauses opened at Geneva on September 24th, 1923. ARTICLE 7 The present Convention, which will remain open to the signature of all the signatories of the Protocol of 1923 on Arbitration Clauses, shall be ratified. It may be ratified only on behalf of those Members of the League of Nations and Nonmember States on whose behalf the Protocol of 1923 on Arbitration Clauses shall be ratified. Ratification shall be deposited as soon as possible with the Secretary-General of the League of Nations, who will notify such deposit to all the signatories. ARTICLE 8 The present Convention shall come into force three months after it shall have been ratified on behalf of two High Contracting Parties. Thereafter, it shall take effect, in the case of each High Contracting Party, three months after the deposit of the ratification on its behalf with the Secretary-General of the League of Nations. ARTICLE 9 The present Convention may be denounced on behalf of any Member of the League or Non-Member State. Denunciation shall be notified in writing to the Secretary-General of the League of Nations, who will immediately send a copy thereof, certified to the in conformity with the notifications, to all the other Contracting Parties, at the same time informing them of the date on which he received it The denunciation shall come into force only in respect of the High Contracting Party which shall have notified it and one year after such notification shall have reached the Secretary -- General of the League of

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Nations. The denunciation of the Protocol on Arbitration Clauses shall entail, ipso facto, the denunciation of the present Convention. ARTICLE 10 The present Convention does not apply to the colonies, protectorates or territories under suzerainty or mandate of any High Contracting Party unless they are specially mentioned. The application of this Convention to one or more of such colonies, protectorates or territories to which the Protocol on Arbitration Clauses opened at Geneva on September 24th, 1923, applies, can be effected at any time by means of a declaration addressed to the Secretary-General of the League of Nations by one of the High Contracting Parties. Such declaration shall take effect three months after the deposit thereof. The High Contracting Parties can at any time denounce the Convention for all or any of the colonies, protectorates or territories referred to above. Article 9 hereof applied to such denunciation. ARTICLE 11 A certified copy of the present Convention shall be transmitted by the Secretary-General of the League of Nations of every Member of the League of Nations and to every NonMember State which sign the same. K.L.MOHANPURIA, Secy. to the Govt. of India

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ANNEXURE-IX Indian Railway, Government of India, Ministry of Railways, Railway Board, Vigilance Directorate, Vigilance manual- 2006, Chapter-II; CENTRAL VIGILANCE COMMISSION (CVC)
201. Objectives of establishing CVC: The Central Vigilance Commission (CVC) was established by the Government of India on 11th February 1964 as an apex body for exercising general superintendence and control over Vigilance Administration. It was set up on the recommendations of the Committee on Prevention of Corruption, popularly known as the Santhanam Committee. Its establishment was considered essential for evolving and applying common standards in deciding cases involving lack of probity and integrity in Administration. It has been conceived as the apex Vigilance institution, free of control from any executive authority, monitoring all vigilance activity under the Central Government and advising various authorities in Central Government Organizations in planning, executing, reviewing and reforming their vigilance work. 202. Statutory status to CVC under CVC Act 2003: 202.1 As a result of the directions given by Supreme Court, in a public interest Writ Petition, to confer statutory status to the CVC, the Government of India promulgated an ordinance in 1998. This Ordinance gave CVC the powers to superintend functioning of the Delhi Special Police Establishment and review the progress of their investigations concerning alleged offences under the Prevention of Corruption Act, 1988. The Government introduced the CVC Bill 1998 in the Lok Sabha to replace the Ordinance. However, the Bill could not be passed and it was notified, under the Governments Resolution dated 4.4.99 that the CVC would continue to discharge its functions. The Bill was reintroduced in 1999. Ultimately, the CVC Act came into being in September 2003. 202.2 The CVC Act 2003 provides for constitution of the Central Vigilance Commission, to inquire or cause inquiries to be conducted into offences alleged to have been committed under the Prevention of Corruption Act 1988, by certain categories of public servants of the Central Government, Corporations established by or under any Central Act, Government Companies, Societies and Local authorities owned or controlled by the Central Government and for matters connected therewith or incidental thereto. 203. Powers & functions of CVC: The CVC has the following functions & powers: 1. To inquire or cause an inquiry or investigation to be made into any transaction in which a public servant working in any Organization, to which the executive 12 control of the Govt. of India extends, is suspected or alleged to have acted for an improper purpose or in a corrupt manner. 2. To tender independent and impartial advice to the disciplinary and other authorities in disciplinary cases, involving vigilance angle at different stages i.e. investigation, inquiry, appeal, review etc. 3. To exercise a general check and supervision over vigilance and anti-corruption work in Ministries or Departments of the Government of India and other Organizations to which the executive power of the Union extends. 4. To exercise superintendence over functioning of the Delhi Special Police Establishment (DSPE) with respect to investigation under the Prevention of Corruption Act (PC Act), 1988; or offences under the Criminal Procedure Code (Cr. P.C.) for certain categories of

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public servants and to give directions to the DSPE for the purpose of discharging this responsibility. 5. To review the progress of investigations conducted by the DSPE into offences alleged to have been committed under the PC Act. 6. To chair the Committee for selection of Director (CBI), Director (Enforcement Directorate) and officers of the level of SP and above in DSPE. 204. Jurisdiction of CVC: 204.1 The jurisdiction of CVC extends to all organizations to which the executive power of the Union extends (refer CVCs letter of 2003). However, for practical reasons, the Commission presently advises only on vigilance cases of Group A officers in Central Government, All India Service Officers, and other officers of public sector undertakings, autonomous organizations, local authorities, societies etc. as notified by the Government. It also advises that investigations may be made into any complaint alleging offences under the PC Act. Notwithstanding that, the CVC has the residuary powers to call for any individual case in respect of employees other then those who are within its normal advisory jurisdiction. In addition, cases of difference of opinion between the CBI and the concerned administrative authorities, in respect of employees who are not within the normal jurisdiction of the CVC, are also resolved by the Commission. 204.2 The investigation reports furnished by Chief Vigilance Officers or CBI are examined in the CVC and, depending upon the circumstances and facts of each case, the Commission advises (a) initiation of criminal and/or departmental proceedings against the concerned public servant(s); or (b) issuance of administrative warning to him/her; or (c) closure of the case. The Commissions advice at this stage is termed as first stage advice. 204.3 The departmental proceedings could be for imposition of a major or a minor penalty. The inquiry report in major penalty cases is furnished to the Commission for its second stage advice before taking a final decision. It also tenders second stage advice in those cases in which the departmental proceedings for minor penalty were initiated on its advice, but the administrative authorities propose exoneration or administrative action on consideration of defence statement. 205. Organization of CVC: 205.1 The Central Vigilance Commission is a multi-member body consisting of the Central Vigilance Commissioner (CVC) and two Vigilance Commissioners (VCs) as its members. The appointment of the CVC and VCs is made by the President on the recommendations of a Committee consisting of (a) the Prime Minister, (b) the Minister of Home Affairs and (c) the Leader of the Opposition in the Lok Sabha. (a) Staff Composition: The Central Vigilance Commission is assisted by a Secretary (of the rank of Additional Secretary to the Government of India), two Additional Secretaries (of the rank of Joint Secretary to the Government of India) and other staff which include nine officers (of the rank of Director/Deputy Secretaries), an OSD and four Under Secretaries. In addition, there are fourteen Commissioners for Departmental Inquiries (CDIs) who are nominated to conduct departmental inquiries relating to major penalty proceedings on behalf of the disciplinary authorities in serious and important disciplinary cases. (b) Technical Wing: The Commission is assisted by its Technical Wing called the Chief Technical Examiners Unit, with two Chief Technical Examiners (of the rank of Chief Engineer), who are assisted by eight Technical Examiners (of the rank of

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Executive Engineer), Six Assistant Technical Examiners (of the rank of Assistant Engineer) and other subordinate staff. 205.2 CTEs unit of the Commission is engaged in examination of Civil & Electrical works executed by Ministries/Departments of Government of India, Central Public Sector Undertakings, Banks and Financial Institutions and Cooperative Bodies etc. falling within the jurisdiction of the Commission. The inspection of Stores purchase contracts and works for computerization etc. is also undertaken by the CTEs Unit. 206. Vigilance angle: 206.1 CVC tenders advice in cases which involve a vigilance angle. It has defined vigilance angle as the following: (i) Demanding and/or accepting gratification other than legal remuneration in respect of an official act or for using his influence with any other official. (ii) Obtaining any valuable thing, without consideration or with inadequate consideration, from a person with whom he has or is likely to have official dealings, or with whom his subordinates have official dealings or where he can exert influence. (iii) Obtaining for himself or for any other person any valuable thing or pecuniary advantage by corrupt or illegal means or by abusing his position as a public servant. (iv) Possession of assets disproportionate to his known sources of income. (v) Cases of misappropriation, forgery or cheating or other similar criminal offences. 206.2 This is not an exhaustive list. CVC has mentioned other irregularities where circumstances will have to be weighed carefully to take a view whether the officers integrity is in doubt. These include cases of gross or wilful negligence; recklessness in decision making; blatant violations of systems and procedures; exercise of discretion in excess, where no ostensible public interest is evident; failure to keep the controlling authority/superiors informed in time. In these cases, the Disciplinary Authority and the Chief Vigilance Officer should carefully study the case and conclude whether there is reasonable ground to doubt the integrity of the officer. 206.3 Thus, the CVC gives its advice only in such cases in which there is a vigilance angle. In other cases where it concludes that the lapses do not attract vigilance angle, however, it does not imply that the concerned official is not liable to face the consequences of his action. Necessary disciplinary action will have to be taken by the concerned disciplinary authority under conduct/disciplinary rules, as deemed appropriate. These cases are not to be referred to CVC for any further advice. 207. Cases that have to be sent by Railway Board to CVC for advice: 207.1 All complaint cases (for action or closure) and other cases involving action against the following categories of officers have to be referred to CVC for advice: (i) All Group A officers (ii) Group B officers officiating on ad hoc basis in the senior scale (Rs.10,000 15,200). 207.2 The restrictions in the case of Group B officers, as mentioned above, emanated out of CVCs letter No.98/VGL/15 dated 16.4.2004. This order meant that cases of Group B officers working in the grades, ` 7,500-12,000 and ` 8,000-13,500, which were sent 15 earlier to CVC, are no longer required to be sent there. In these cases, advice will be given by Additional Member (Vigilance), who is the Chief Vigilance Officer, Ministry of Railways. However, in case of difference of opinion between the Disciplinary Authority and Additional Member (Vigilance), even these cases will have to be sent to CVC. In case of such officers, in which CVC had tendered its first stage advice before issue of its instructions dated 16.4.04, the matter need not be referred to it for its 2 nd stage advice, if

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the Disciplinary Authority proposes to take action in consonance with the Commissions 1st stage advice, provided that none of the officers involved in that matter is a Group A officer. However, in case the proposed action does not coincide with CVCs 1st stage advice, then the case will have to be sent to the Commission. 207.3 In a composite case, involving gazetted officers and non gazetted staff, CVCs advice would be necessary for all officials, irrespective of their level, if a Group A officer is also involved with the case. 207.4 While delegating the powers of tendering advice in the case of Group B officers to Additional Member (Vigilance), CVC has also observed that it may depute its officers to conduct Vigilance Audit through on site visits, monthly reports etc. If it comes across any matter, which in its opinion has not been handled properly, it may recommend its review or give appropriate directions. 208. CVC and complaints: 208.1 Vigilance investigation can be initiated on impulses arising from various sources, namely, an authenticated complaint (i.e. a signed complaint, with the name and address of the complainant, which is owned up by the complainant as having been sent by him), irregularity noted during a preventive check, serious irregularities highlighted by audit, departmental inspection reports, stock verification reports, scrutiny of annual property statements, reports of Parliamentary Committees like the Estimates Committee, Public Accounts Committee and the Committee on Public Enterprises, reports of irregularity in accounts revealed during the routine audit of accounts, complaints and allegations appearing in the Press, scrutiny of transactions reported under the Railway Services (Conduct) Rules, 1966, proceedings of the Houses of Parliament, etc. 208.2 While any of these sources can lead to detection and investigation of irregularities, complaints need to be tackled in a particular manner, as laid down in various policy instructions on the subject. The broad features of complaint handling are as below: (i) Anonymous complaints (i.e. complaints that do not bear the name and address of the complainant) and pseudonymous complaints (i.e. complaints which do not bear the signature of the complainant, or which on verification are not owned by the complainant) are not to be investigated. However, if the Railway Board/Zonal Railway proposes to look into any verifiable fact alleged in such complaints, it may refer the matter to CVC seeking its concurrence to do so. Such cases may be referred to the Railway Board, through the Chief Vigilance Officer or the Head of the Organization, irrespective of the level of employees involved, for seeking concurrence of CVC. (ii) Complaints are also referred by CVC, calling for a report on it. Even though such complaints may be anonymous/ pseudonymous, Board/Zonal Vigilance should treat it as a signed complaint. Clarifications, if required, could be obtained from the complainant (s) as part of the enquiry into the matter. (iii) There are instances where the complainant wants to keep his identity a secret for reasons of security. He may be a whistle blower of his organization and may like to reveal certain crucial aspects that lead to unravelling of serious irregularities. Such persons can send their complaints to CVC, which is the designated agency to receive written complaints for disclosure on any allegation of corruption or misuse of office, and to recommend appropriate action. While accepting such complaints, it is the CVCs responsibility to keep the identity of the complainant secret. Such complaints are to be addressed to the Secretary, CVC in a closed/secured envelope, with the superscription, Complaint under the Public Interest Disclosure. The complainant has to give his name and address in the beginning or end of the complaint or in an attached letter. The CVC does not entertain anonymous/pseudonymous complaints. The text of the complaint

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should be carefully drafted so as not to give any details or clue about the complainants identity. However, details of the complaint should be specific and verifiable. In order to protect the identity of the complainant, CVC will not issue any acknowledgement. Such complainants are advised not to enter into any further correspondence with CVC in their own interest. The CVC will ascertain from the complainant whether he made the complaint or not. Then, after concealing the complainants identity, CVC will make discreet inquiries to ascertain if there is any basis of proceeding further with the complaint. If CVC concludes that the matter needs further investigation, it shall officially seek comments or explanation from the Head of the Department of the concerned organization. While doing so, CVC will not disclose the complainants identity and will also request the concerned Head of the organization to keep his identity secret, if the concerned Head comes to know about it. After obtaining the response of the concerned organization, if CVC is of the opinion that investigations reveal either misuse of office or substantiate allegations of corruption, it shall recommend appropriate action to the concerned Government Department or organization. Such action can include appropriate proceedings against the concerned Government Servant, appropriate administrative steps for redressing the loss caused to the Government due to the corrupt act or misuse of office, initiation of criminal proceedings in suitable cases, or taking corrective measures to prevent recurrence of such events. (iv) In the case of signed complaints, the investigating officials should try to contact the complainant also during the course of investigation. (v) In cases where complaints/information are received or taken note by CVC, it can take any of the following course of action: (a) It may entrust the matter to Railway Board for inquiry. In these cases, investigation will be urgently undertaken by Board/Zonal Vigilance, as per the decision of the CVO, Ministry of Railways. On conclusion of the investigations, Railway Board would send its report, along with other relevant records, to CVC, who will advise Board about the further course of action. (b) CVC may ask the Central Bureau of Investigation (CBI) to make an inquiry into the matter. CBI will furnish its report, along with other relevant records, to CVC, who will advise Railway Board about the course of further action. (c) CVC may ask CBI to register a case and investigate it. CBI will inform CVC of the results of investigation and, if it is of the view that a prosecution should be lodged, CBI will forward the final report of its investigation to CVC, if sanction for prosecution is to be issued in the name of the President. Simultaneously, CBI will forward a copy of its investigation report to Railway Board for comments. Such comments should be sent to CVC within one month from receipt of the report. After considering CBIs report, Railway Boards comments and all relevant records, CVC will advise whether or not prosecution should be sanctioned. Since the aforesaid cases are of very urgent nature, Zonal Railways should furnish their comments within 15 days to Railway Board. 208.3 To sum up, in all authenticated complaint cases against officials who are within CVCs jurisdiction (i.e. Gr. A officers, and Gr. B officers officiating on adhoc basis in the scale ` 10,000-Rs. 15,200), CVCs advice has to be taken, for closure or action. 209. Stages at which CVC is consulted in Gazetted cases: (a) Cases in which the Administrative authority does not think that an investigation is necessary such complaints, together with views of the Administrative authority, will be forwarded to CVC for advice. Any information passed on by CBI regarding the conduct of any officer should also be dealt with in the same manner. At the Zonal level, whenever

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a complaint is received against a Gazetted officer (other than an anonymous/ pseudonymous complaint), Zonal Vigilance will decide within 15 days whether an investigation is necessary or not. In case it decides that no investigation is necessary, it has to send its detailed remarks, along with all relevant papers, to Board Vigilance, which will refer the matter to CVC, if it agrees with the views of the Zonal Railway. (b) Cases in which an Administrative authority has come to the conclusion, after an investigation, that no further action is necessary such cases will be reported to CVC for advice. (c) Cases in which officers commit procedural lapses in violation of instructions laid down in their Manuals of Office Procedure, etc., resulting in extra expenditure or loss to the Government such cases will be referred to CVC. If there is negligence on the part of the officer, which has caused substantial loss to the Government, then the CVC will be consulted, irrespective of whether the case figures in an Audit Para or comes before the Public Accounts Committee of the Parliament or not. In such cases, Zonal Railway will send an investigation report promptly to Railway Board, along with the recommendation of General Manager, about action to be taken against the concerned official (s). (d) Cases in which the Administrative authority proposes to institute disciplinary proceedings after an investigation in these cases, the investigation report, along with all relevant records, will be sent to CVC with a recommendation for a particular course of action. Where such cases have been investigated by Zonal Railway, recommendations of the General Manager will also be obtained while sending these cases to Railway Board for obtaining the advice of CVC. If the case has been investigated by Board Vigilance, then the comments of the concerned Member of Railway Board will be obtained for officers above Senior Administrative Grade (SAG). For officers up to the Selection Grade (SG), comments of PHOD & GM of the concerned Zonal Railway should also be obtained, before putting up the case to the concerned Board Member. (e) Cases in which investigation reports are received from CBI such reports, against gazetted officers (both Group A & B), either involved singly or along with non gazetted staff, are referred by CBI to the Railway Board and to GM (Vigilance) of the concerned Zonal Railway (one copy each). A copy of the report is also sent by CBI to CVC. The Railway Board has to furnish its comments on the report to CVC within one month. In such cases, the Zonal Railway should furnish its comments to Railway Board within 15 days, along with relevant service particulars of all officers against whom CBI has proposed disciplinary action. In the case of CBIs investigation report, the comments of Ministry of Railways should specifically deal with (i) views on technical matters spelt out in the report (ii) comments on correctness of departmental procedures and practices, as mentioned and relied upon in CBIs report (iii) comments on factual position obtainable from records of the Department, as reported by CBI (iv) views on impartial use of discretionary powers by the accused officer in the said case, and its comparison with the exercise of such discretion by other officers in similar situations (v) views on the necessity of obtaining evidence of some witnesses, if any, which the CBI did not examine (vi) comments on any extenuating circumstances in favour of the accused (vii) comments on CBIs conclusion (viii) comments on the representation, if any, submitted by the accused in this regard. (f) Reconciling difference of opinion between the CBI and administrative authorities in cases recommended by CBI to the concerned administrative authority for departmental action, if there is a difference of opinion between the two (i.e., CBI and the administrative authority), then the matter is referred to CVC for advice. Similarly, if the CBI considers that findings in a departmental inquiry should be reviewed but there is a difference of opinion between CBI and the concerned Ministry about it, then the matter will be referred

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to CVC for advice. Once the matter has been reviewed, the decision of the reviewing authority should normally be considered final and subsequent reviews should not be called for. (g) In case of anonymous or pseudonymous complaints, wherein the Ministry of Railways considers that investigation is required since facts are verifiable, prior concurrence of CVC is required for doing so. Also, CVC has to be apprised about the conclusion of such investigation. (h) In cases where the alleged offence was committed by a functionary who was beyond the jurisdiction of CVC (in so far as he was a Group C staff or Group B officer in the pay scale of ` 7,500-12,000 and ` 8,000-13,500), but was later promoted and fell within the jurisdiction of CVC (i.e. all Group A officers and Group B officers officiating on adhoc basis in the pay scale of `10,000- 15,200), reference will be made to CVC for its advice. (i) In cases involving a gazetted officer, arising out of a preventive check or otherwise, where the irregularity has a Vigilance angle or ulterior motive is detected on the part of the officer, the case will be referred by Zonal Railways to Railway Board Vigilance, who will then refer it to CVC. (j) In cases where a fresh complaint is received against a gazetted officer, that substantially covers the same ground as a previous complaint against the same person, which had been earlier dealt with in consultation with CVC, it would be sufficient if Board Vigilance is only apprised of that situation. (k) In cases in which CVC asks for a report, such reports should be submitted expeditiously to Railway Board Vigilance, which will send it to CVC. 209.1 Thus, all investigation reports involving gazetted officers in the jurisdiction of CVC should be referred to CVC for its advice, irrespective of whether the recommendation is for closure or action. However, a preventive check report can be closed by Board Vigilance (Additional Member/Vigilance) if no irregularity is noted. 209.2 Gazetted cases investigated by Zonal Railways reach the office of Railway Board Vigilance with recommendation of the General Manager about the proposed course of action, as also the comments of SDGM and the concerned PHOD. This is scrutinised by Board Vigilance. In cases of Group A officers, where GM has recommended closure but Board Vigilance does not agree with GMs views and proposes action against the official, the case is put up to the concerned Board Member for his views and then sent to CVC. Where Board Vigilance agrees with GMs recommendation of closure, the case is not put up to the Board Member, but is sent directly to CVC. In cases of Group A officers, where GM has recommended action, the case is put up to the concerned Board Member after scrutiny by Board Vigilance, and then sent to CVC. In cases of Group B officers, where GMs views are acceptable or a more lenient view is taken, final disposal is done at the level of Additional Member (Vigilance). However, in cases against Group B officers, where GMs views are not acceptable and a more serious view is taken by Board Vigilance, the case is put up to the concerned Board Member and sent to CVC. In cases of Group A officers investigated by Board Vigilance, (a) for officers upto Selection Grade, comments of the PHOD & GM of the concerned Zonal Railway are obtained, and then the case is put up to the concerned Board Member, (b) for officers of Sr. Administrative Grade & above, views of the concerned Zonal Railway are not obtained and the case is put up directly to the concerned Board Member. After this, the case is sent to CVC for its 1st stage advice. CVC has devised a format in which cases should be sent to it for its 1st stage advice. This has been circulated vide Boards letter Nos. 2003/V-1/CVC/1/12 dated 14.10.2003 and 30.1.2004.

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209.3 The recommendation to CVC may be for (a) action, i.e., administrative action (counselling /cautioning/unrecorded or recorded warning), initiation of minor penalty proceedings or major penalty proceedings, or (b) closure. 209.4 In its 1st stage advice, if CVC agrees with the recommendations of the Railway Board, then the follow-up action is initiated immediately. In case CVC differs with the Board, then the case is put up to the concerned Board Member, who may agree or disagree with CVC. If he agrees with CVC, then CVCs advice is implemented. In case he differs with CVC, then the case is sent back to CVC for reconsideration, along with reasons for doing so. In case the CVC reconsiders its advice and agrees with the Members view, then action is taken to implement Members orders. However, if CVC disagrees with the Member, then the case is again put up to the Member. If he agrees with the CVCs view, then action is taken to implement CVCs advice. However, in case he disagrees with CVCs advice, then the Members proposed action is implemented and CVC is advised about it. This is taken as a case of difference between CVC and the Ministry. It is the prerogative of CVC to include such cases in its Annual Report, which is placed on the floor of both Houses of Parliament, and can be discussed by Honble MPs. 209.5 In cases in which major penalty action is initiated on CVCs advice, immediate action is taken to issue the charge sheet, after which progress at various stages of disciplinary proceedings is closely monitored. On completion of the inquiry, the Railway Inquiry Officer (RIO) concludes whether or not the charges are proven. 209.6 These findings are put up to the DA, along with Vigilance comments thereupon. The DA takes an independent, provisional view (of closure/administrative action/minor or major penalty) after considering the IOs report, all relevant records and evidence, as also the Vigilance comments. The entire case file is sent to Railway Board by Zonal Railway containing the IOs report, Vigilance comments and DAs provisional view. In case the DA disagrees with some findings of the IO, then he prepares a draft disagreement memo on aspects of such differences with the IO, mentioning reasons for it. In such cases, the disagreement memo is also a part of the documents that arrive in the Boards office from Zonal Railway. These are scrutinized and commented upon by Board Vigilance. In case the concerned Member, Railway Board, is the DA of the official, then the Members views are also obtained on file. If the Member is not the DA, then his views are not taken. After this, the case is sent to CVC for its 2nd stage advice. CVC examines the entire case and gives its 2nd stage advice in the form of action to be taken against the charged official. The following alternatives are possible: (a) CVC disagrees with DAs provisional views: The case is put up to DA. If the DA agrees with CVC, then action is taken to implement CVCs advice. If the DA disagrees with CVC, then the case is sent back to CVC for reconsideration. After CVC sends its reconsidered advice, it is again put up to DA. The decision that DA takes at this stage is final. (b) CVC agrees with DAs provisional view: In this scenario, the case is sent to Zonal Railway/ Board (as the case may be) for implementation of CVCs 2nd stage advice. In this case, the IOs report, along with disagreement memo, if any, is conveyed to the charged official who is given an opportunity to represent against the IOs report and disagreement memo, if any. The disagreement memo should be based essentially on the DAs views and CVCs 2nd stage advice. It spells out grounds for not agreeing with the IOs findings. The charged official responds to the IOs report and disagreement memo, if any. Then, the case is put up to DA for his final orders. In case the DA agrees with CVCs 2nd stage advice, then he can issue the order of penalty to the charged official. However, in case he disagrees with CVCs advice, then he has to record a provisional order on file and the case is sent back to CVC. If CVC agrees with DAs view, then the DA can issue

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the order. However, if CVC disagrees with DA, then the case is again put up to DA who finally decides whether or not to agree with CVCs advice. In either condition of agreeing or not with CVC, the DAs view is final and he issues the order as he deems fit. If he has finally chosen to disagree with CVC, he should record reasons for disagreement and then this gets reflected as a case of difference between CVC and the Ministry of Railways. CVC can include this case in its Annual Report that is tabled on the floor of both the Houses of Parliament and can be discussed by Honble MPs. 209.7 There is a stipulation on the number of copies of the inquiry report to be sent to various agencies at different stages. This is as below: The RIO has to send 5 copies of the inquiry report to the authority who ordered the inquiry. That authority sends 4 copies to the SDGM/CVO of the Railway/Production Unit for obtaining CVCs 2nd stage advice. SDGM/CVO forwards three copies of the report to Board Vigilance with his comments. After examination of the report, Board Vigilance forwards two copies of the report to CVC, along with its comments. After scrutiny of the report, CVC sends one copy to the Board, along with its 2nd stage advice. 209.8 There is also a stipulation about the documents that have to be sent to CVC for its 2nd stage advice. These are as below:(i) Copy of the charge-sheet with all the annexure. (ii) COs statement of defence. (iii) The IOs report and connected documents (including POs brief and COs brief) and (iv) Self- contained note on findings of the IO on each of the Articles of charges, along with the tentative views of DA and the CVO. 209.9 In cases of appeal, the Appellate Authority is expected to keep in view CVCs advice and decide on the appeal. If he decides to deviate from CVCs advice, the CVO will report this to CVC, which will take an appropriate view whether the deviation is serious enough to be included in its Annual Report. When the President is the Appellate authority, the case is decided by him in consultation with UPSC, and CVC is informed of the final decision. 210. Commissioners of Departmental inquiries (CDI): In cases of major penalty against gazetted officers, the CVC mentions in its advice whether the DAR inquiry will be conducted by an Inquiry Officer to be nominated and appointed by the Ministry of Railways (RIOs i.e. Railway Inquiry Officer), or by CDIs, who function under CVC. In case there is no specific mention of this fact, it is presumed that the Ministry of Railways would nominate an RIO, from amongst a panel that it maintains. In case the inquiry is conducted by a CDI, its report is submitted to Railway Board, which calls for comments of the Zonal Railway Vigilance and DAs provisional views. 211. Mode of communication between Ministries/Departments & CVC: The mode of communication between Ministries/Department & CVC should be by way of referring (sending & receiving) files. However, if in any case the CVC or the Ministry/Department does not wish to move the concerned file, a self contained note or letter may be sent. In the context of the Ministry of Railways, Zonal Railways cannot make a direct reference to CVC all cases have to be routed through Railway Board Vigilance to the CVC. 212. Procedure to be followed in prosecution cases: 212.1 Prior sanction for prosecution of a public servant before a Court of Law for acts of criminal misconduct is required to be accorded by the competent authority either under

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Section 19 of Prevention of Corruption Act or Section 197 (1) of the Criminal Procedure Code. For this purpose, CBI requests the Ministry of Railways to accord sanction of prosecution of a Railway servant charged for such offences, with complete particulars to enable the competent authority to comprehend the gravity of the misconduct and to take a suitable decision by independent application of mind. The competent authority to grant sanction for prosecution is the one who is competent to remove the Railway Servant from service at the time of launching of the proceedings. 212.2 It is mandatory to obtain CVCs advice in such cases involving a gazetted officer who is a Presidential appointee, namely, a Group A officer. CVCs advice is also required in composite cases, involving Group A officers and Group B officers/nongazetted officials. However, if the case pertains to Group B officers and/or non-gazetted officials, CVCs advice would not be necessary unless the Ministry of Railways proposes to differ from CBIs recommendation to grant sanction. 212.3 In case of Group A officers, the Ministry of Railways has to submit its comments on sanctioning prosecution within one month to CVC. In view of this, Zonal Railways have to furnish their comments to Railway Board within 15 days of the receipt of request from CBI. Sanction of prosecution or otherwise has to be given within two months of the receipt of CBIs report. 212.4 In cases of Group B officers and non-gazetted officials, sanction for prosecution should be issued within one month from the receipt of CBIs report. No consultation with CVC is required if the competent authority agrees with CBI for granting sanction for prosecution. However, if the competent authority does not propose to accord sanction, then it is necessary to consult CVC in these cases, comments have to be furnished by Railway Board to CVC within one month, for which Zonal Railways have to send their comments to Railway Board within 15 days. 212.5 When the CBI is of the view that prosecution should be launched, and if such sanction is required under the law to be issued in the name of the President, CBI forwards copies of its investigation report to CVC and the Railway Board. The Board should send its comments to CVC within one month of receipt of the report. The CVC examines the case in totality, after considering comments of the Board. Then, it advises Board on whether or not prosecution needs to be sanctioned. Board considers CVCs advice and takes a decision about sanctioning prosecution or otherwise. In case Board decides to sanction prosecution, then it issues a Speaking Order in this regard, the lay out of which has been standardized and communicated to all Vigilance Wings of the Ministry of Railways vide letter No.97/V-1/VP/1/2 Pt. A, dated 17.12.2003. This is detailed in Annexure II/1 to this chapter. In case Board proposes not to accept CVCs advice for sanction of prosecution, then the case is referred back to CVC for reconsideration with the approval of the concerned Board Member. The CVC may call for a tripartite meeting to help resolve the disagreement. After this, CVC gives its reconsidered advice. However, if Board still disagrees with CVCs advice, then the case is referred to the Department of Personnel & Training (DOPT). The case is put up to the Minister in charge of Personnel for the final decision. 212.6 Sanction for prosecution is not required for a retired public servant, with respect to offences committed by him while he was in service. 212.7 In cases where there are several co-accused, and sanction for prosecution for a few of them is required to be issued in the name of the President and, for others, by other authorities, the CBI sends its final report in such cases in respect of all the accused officers to CVC, and simultaneously endorses copies of the report to the concerned Ministries/Departments. In the case of Presidential sanction for prosecution, the procedure as described earlier will be followed. As regards other officers, CVC advises the

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concerned competent authorities to accord sanction for their prosecution. In such cases, the CBI will not file charge sheets in a piecemeal manner. All charge sheets will be filed together by CBI in the Court(s) with competent jurisdiction against the officers involved, after sanction for prosecution has been received for all the concerned officials. 212.8 In cases where the General Managers or their subordinates are the sanctioning authority, the case along with all relevant papers, comments on CBIs report (if not agreed to, then with reasons thereof) should be forwarded to Railway Board within 15 days of receiving the report. 212.9 The sanction of prosecution of Group A officers is within the competence of MR, while that of Group B officers is within the competence of the concerned Board Member. 213. Statements/returns to be submitted to CVC: 213.1 CVC is empowered to call for reports, returns and statements from all Ministries/Departments in order to exercise general check & supervision over Vigilance and anti-corruption work in various Ministries/Departments. In pursuance of this, CVC calls for monthly reports, quarterly reports and annual reports in a prescribed format from all the Ministries/Departments within its jurisdiction. This format has been advised to all the Vigilance wings in the Ministry of Railways vide letter No.2004/V-1/RET/8/1 dated 16.8.2004. As regards monthly reports, data should be compiled for the period from 26th of the previous month up to 25th of the month for which the report is being prepared, and the report should be sent so as to reach Boards office by the last day of the month. 213.2 Statements are sent to CVC regarding cases in which the implementation of its advice is pending. In this regard, the following may be noted: 1. Cases pending implementation of CVCs first stage advice would mean, (a) In major penalty cases - till the appointment order of the IO and PO is received & (b) In minor penalty cases - till the order of imposition of penalty is received. 2. Cases pending implementation of CVCs second stage advice would mean -till the order of imposition of penalty is received.

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Tenders, contracts and arbitration ANNEXURE -X Format of measurement book and guide lines for filling the same
Embodying All Correction Slips issued up to 45, dated16.07.08 to Engineering Code 1313. Record of Measurements.-Payments for all work done otherwise than by departmental labour and for all supplies are made on the basis of measurements recorded in Measurement Books (Form E. 1313 given below) in accordance with the rules contained in this Chapter. Form E 1313 Sheet 1) COVER ......................................Railway MEASUREMENT BOOK No................................. Engineering Department....................................... Division............................................... Name ................................................................... Designation........................................................... Date of issue......................................................... Date of return.................................... .. ________________________________________________________________________ (Title page) Form E 1313 (Sheet 2) MEASUREMENT BOOK No............................... Division...................................................Issued to............................................. (Name & designation) ...................................................on............................. (station) (date) Received by................ (Signature) ........................................................ (Designation) .............................................................. (Station) .. (date) Date of first entry................................................... Date of last entry...................................................

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Date received in Division office after completion of book................................................... Certified that this Measurement Book contains pages numbering 1-100 (both pages inclusive) which have been counted by me and are correct.

Signature.............................................. Designation..................................... Date..................................................... INDEX OF M.B. (Sheet 4) Sl. Item No. Particulars of Entries running or final Agreement or work Order Ref. Page From TO Remarks

(Sheet 5) Particulars No. L. B. D. Contents

1314. The measurement books should be considered as very important record. All the books belonging to a division should be numbered serially and a register of them (Form E. 1314 given below) should be maintained in the divisional office showing (1) the serial number of each book, (2) the name and designation of the person to whom issued, (3) the date of issue and (4) the date of its return, so that its eventual return to the divisional office may be watched. A similar register (Form E. 1314 given below) should also be maintained in the sub-divisional office. Books no longer in use should be withdrawn promptly even though not completely written up. The eventual return of all measurement books should be insisted on. They should be carefully preserved for ten years. To ensure this, measurement books should be carefully listed and made over to the open line authorities when the construction divisions are closed.

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Form No. E. 1314 ............ RAILWAY REGISTER OF MEASUREMENT BOOKS Department. Division.. Station.
Serial No. of Date of Name & Date of Name & the Receipt Designation of issue Designation of measurement the person to the person to book whom issued whom transfer Date of transfer Date of Remarks return of completed book

1315. Recording of Measurements:-On the open line organisation of the Railways the following powers can be exercised in recording measurements: (i) Inspectors of Works and Permanent Way Inspectors in Gr. II (Rs. 1600-2660) and Gr. I (Rs. 2000-3200) can record all measurement including ballast measurements subject to the test checks given below, but cannot record earth work sectional measurements unless they are specifically nominated by the Assistant Engineer on considerations of competency and reliability. A 10% check by the Assistant Engineer is necessary for works costing up to ` 25,000/-, if the value of the work exceeds the estimated cost by more than 10% and for works costing above `25,000/- a 20% check by Assistant Engineer is necessary. In the case of ballast and pitching stones measurements a 100% check on quality and the quantity by the Assistant Engineer is necessary. The Check of the Assistant Engineer in respect of earth work sectional measurements may be done at his discretion. Those Inspectors in Gr. I (Rs. 2000-3200) may finalize measurement for work up to `10,000/- even when the total value of the works exceeds the estimated value by more than 10%. (ii) Inspector of Works and Permanent Way Inspectors in Grade III (`1400-2300) when they hold independent charge, can record measurement for works costing up to `25,000/each, subject to a test check of 20% by the Assistant Engineer. (iii) Sub-Overseers, Mistries having a diploma in Engineering and having more than three years of service and those not having a diploma in Engineering but having six years experience to be nominated by name by the Divisional Engineer can record measurements of works up to `10,000/-, subject to a test check of 20% by the Inspector of Works. (iv) Recording of Measurement of Elec. open line & construction Works.

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(a) Shop Superintendent/ Chief Traction Foreman, in grade `2375-3500; Sr. Elec. Foreman/ Elec. Foreman/ Traction Foreman in Grade `2000-3200/- can record all measurements. A 10% check by the Assistant Electrical Engineer/Divisional/district Electrical Engineer. is necessary for the work costing up to `25,000/- each if the value of the work exceeds the estimated cost by more than 10% and for works costing above `25,000/- and 20% check by Assistant Electrical Engineer/Divisional/District Elec. engineer is necessary. (b) Assistant Electrical Foreman/Assistant Traction Foreman/Sr. Electrical charge-man in grade `1600-2660/- can also record the measurements subject to 10% test check on the works costing up to ` 25,000/- and 20% check on the works costing more than 25,000/- by Assistant Electrical Engineer/ Divisional/District Elec. Engineer. (c) Elec. Chargemen/Assistant Electrical Foreman in Gr. `1400-2300 when they hold independent charge can record measurements for works costing up to `25,000/- each subject to a test check by 20% by the Assistant Electrical Engineering/Divisional/District Electrical Engineer. (d) Elec. Chargemen having a diploma in Electrical Engineer and having more than three years of service and those not having a diploma in Elec. Engineer but having six years experience nominated by name by the Divisional/District Elec. Engineer can record measurements of works up to `10,000/- subject to a test check of 20% by the Asstt. Electrical Engineer/District Electrical Engineer. 1316. On construction projects and special works, Sub-Overseer Mistries cannot record measurements. Inspector of Works and Permanent Way inspectors cannot record measurements for the supply of ballast, pitching stones and earth work. For all other works, Inspectors of Works and Permanent Way Inspectors in Grade I & II can record measurements upto a value of Rupees One lakh, subject to a 20 per cent test check by the Assistant Engineer. Measurement of ballast and pitching stones, classification of ballast and measurement for earth work will be done by the Assistant Engineer. 1317. For measurement of earth work cross-sections levels may be recorded by Inspector of Works in the field book which should be in ink or inked before test checking by the Assistant Engineer. The Assistant Engineer should exercise a check of 100 per cent in the case of levels along the centre line of alignment, and not less than 20 per cent of the remaining levels of the cross sections with the proviso that this check should invariably be carried out in cross sections having cross slopes. All the corrections in the field book must be initialled by the Assistant Engineer and no subsequent corrections should be made by any person other than the Assistant Engineer who while doing so should record the reasons for the same. The signature of the contractor or his authorised agent should be taken on every field book accepting the correctness of levels recorded therein. Plotting of the cross sections may be done on graph paper taking care that sufficiently large scale is adopted for plotting and there is not much distortion of horizontal and vertical scales adopted. After plotting the cross sections the levels should be inked and each sheet containing the cross section should be signed by the Inspector of Works, Assistant Engineer and the contractor. While plotting the cross sections, the proposed

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theoretical profiles of the earth work should also be plotted to ensure that the work is done to actual requirements and to avoid future claims from the contractors. For computing the quantity of earth work arithmetical calculation is to be preferred but if necessary counting of square method can also be adopted. 1317-A: The field Books/Level Books used for recording the levels should be machine numbered and these books should be maintained, accounted and kept in safe custody i n the same way as Measurement Books are maintained, accounted and kept. (Authority Boards letter No. 2007/ce.1/ct/8 dated 9-5-08)-ACS NO.44

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BIBLIOGRAPHY 1. 2. 3. 4. 5. 6. 7. 8. 9. Constitution of India. Indian Contract act (IX) of 1872. Indian Railway act, 1989. Contract Labour (Regulation & Abolition) Act 1970. Works hand Book Part-I & part-II, Engineering Department, Northern Railway, May 1999; (Updated by the author till 2010). Compendium of Instructions on Works Contracts, Northern Railway, December 2007. Engineering Code, Indian Railways. Tender Documents, Central Organisation for Railway Electrification for Electrical and Signal & Telecommunication departments. Model Document for Project Management Consultancy (PMC) services on Indian Railway, by Railway Board, July 2010. *****

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About the book

With the depleting work force in government organisations, increased infrastructural activities and a long queues of aspirants seeking jobs, getting the work done on contractual basis is the win-win condition prevailing in the country. Over the period, system of contracting has become more organised, based on rules and Codal provisions viz. Constitution of India; Indian contract act 1872, followed by Contract Labour (Regulation & Abolition) Act 1970, revised Arbitration and Conciliation Act, incorporated in 1996 & Indian Railway Act 1989, relevant portions of which have been incorporated in the book while dealing the contracts. Railways are yet another organization, which not only frame the rules but also modify them on real time basis and ensure its implementation there being an independent Ministry of Railways. Much material on the subject is not available in the market. The book in your hand, running in 229 pages, formed in seven chapters is brought out for guidance and time to time consultation and reference. It shall be useful to the employers as well as to the contractors. First five chapters of the book cover system of tendering and contracting i.e. Contractual system, Codes and types of firms, Companies and Joint Ventures; tenders with respect to type of services such as Execution of works of general nature, pertaining to specific requirement, labour oriented or for consultancy and based on system of contracting such as single tender, limited tender, special limited tender, single or two packet system of tendering and dispensation of tendering system to get the work done on quotation basis; Process of Tendering & Entering in to Contract and latest system of Project Management Consultancy Contracts; Post contractual matters, variations, vitiation, advances to the contractors, procedure for getting work done through quotations and disputes; conditions of contracts covering General Conditions of Contract as prescribed by Ministry of Railways, and Special Conditions of Contract. Commandments for Tender Committee & Canons of Measurements are useful tips for the user. Chapter-VI cover Arbitration under the Arbitration and Conciliation Act, 1996, matters of arbitration in general as well as with reference to railway rules. The last Chapter-VII of the book covers Contracts & Vigilance, Canons of financial proprietary, procedures and some suggestions to deal with vigilance matters and role of Fragrance, when involved innocently. Availability of operating portions of these acts, rules and formats, as annexure to the book shall be of great advantage as ready reference. About the author Pramod P. Goel, the author of this book is BSc, MBA and member IETE. He retired as Deputy Chief Signal & Telecom Engineer having served Indian Railways for about 40 years. During this period he worked in construction organisation for about nine years and for about twelve years in Central Organisation for Railway Electrification. After retirement he worked with RITES for about one year and than got associated with the prestigious work of modernisation of signalling system in Ghaziabad - Kanpur section as Consultant. Over the period he has gathered an excellent multi dimensional blend of experience in contractual systems of execution of the works. Books by the same author: Already published: 1. Indian Railway Signal Engineering, Volume-I, History, systems of working, signals generally. 2. Indian Railway Signal Engineering, Volume-IV, Multi Aspect Colour light Signal Engineering including Electronic Interlocking. Under publication: 1. Indian Railway Signal Engineering, Volume-II, Designing of Signal Engineering Plans & drawings. 2. Indian Railway Signal Engineering, Volume-III, Two & three aspect Mechanical Signal Engineering. 3. Electronic Interlocking By: S.C. Mishra & Pramod P. Goel. Pramod P. Goel