invalidating the award of contract to some of the respondents. There is no
doubt that a court, in its judicial review jurisdiction, exercises a limited role.
That does not include the wisdom of the decision of the Government or
executive agency which awards the contract. This court recollects the
decision of the Supreme Court in Air India Ltd. v. Cochin International
Airport Ltd & Ors. (2000) 2 SCC 617, in this context, that:
"7………………The award of a contract, whether it is by a private party or
by a public body or the State, is essentially a commercial transaction. In
arriving at a commercial decision considerations which are of paramount are
commercial considerations. The state can choose its own method to arrive at
a decision. It can fix its own terms of invitation to tender and that is not open
to judicial scrutiny. It can enter into negotiations before finally deciding to
accept one of the offers made to it. Price need not always be the sole
criterion for awarding a contract. It is free to grant any relaxation, for bona
fide reasons, if the tender conditions permit such a relaxation. It may not
accept the offer even though it happens to be the highest or the lowest. But
the State, its corporations, instrumentalities and agencies are bound to
adhere to the norms, standards and procedures laid down by them and cannot
depart from them arbitrarily. Though that decision is not amenable to
judicial review, the court can examine the decision-making process and
interfere if it is found vitiated by mala fides, unreasonableness and
arbitrariness. The State, its corporations, instrumentalities and agencies have
the public duty to be fair to all concerned. Even when some defect is found
in the decision- making process the court must exercise its discretionary
power under Article 226 with great caution and should exercise it only in
furtherance of public interest and not merely on the making out of a legal
point. The court should always keep the larger public interest in mind in
order to decide whether its intervention is called for or not. Only when it
comes to a conclusion that overwhelming public interest requires
interference, the court should intervene.”
IN THE HIGH COURT OF DELHI AT NEW DELHI
SUBJECT : TENDER MATTER
Decided on: 27.09.2013
W.P.(C)4056/2013 & C.M. APPL. 9559/2013
MI2C SECURITY & FACILITIES PRIVATE LIMITED .....
versus
GOVERNMENT OF NCT & ORS. ...
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE NAJMI WAZIRI
MR. JUSTICE S. RAVINDRA BHAT
FACTS
1. In the present writ proceedings, the Petitioner, a private limited
company engaged in providing security services to various installations,
challenges the award of work order dated 24.06.2013 by the first Respondent
to the second respondent (hereafter “the private respondent”).
2. The brief facts are that the Government of NCT of Delhi, General
Administration Department (Care Taking Branch) (hereafter referred to as
“GNCT”) issued a tender notice (Tender ID No. 2012_GAD_24542_1) on
08.11.2012, which was released through an e-procurement solution, inviting
applicants to bid for providing security services at Vikas Bhawan-II.
According to the tender notice, the estimated cost of the tender was ` 1.44 crore for 2 years and the last date/time for receipt of tenders through eprocurement
was 29.11.2012 till 01.00 p.m. The scheduled tender opening
was on the same day at 03.00 P.M.
3. The Petitioner, along with Respondent Nos. 2 to 9, was found eligible
for the technical bid. On 08.02.2013, the financial bid was opened and the
name of L-1 bidders pre and post tax was declared by the GNCT. Later, the
second respondent was declared as a successful bidder and was awarded the
work contract by work order dated 24.06.2013 to take over the security
arrangements of Vikas Bhawan-II, w.e.f. 1st July, 2013. The award of
contract has been challenged. The respondents were served; the first, second,
fourth and sixth respondent, entered appearance. The first two respondents
filed their return. The said respondents, who entered appearance, were
represented by counsel.
Petitioners’ contentions
4. The Petitioner argues that the award of the tender to the second
respondent is illegal and void ab initio because it is in clear violation of the
terms and conditions of the tender documents, statutory provisions and
settled principles of law. It is argued that the Petitioner, as per the
requirement of Annexure XI, included the wages for “weekly off day” in the
rates quoted. The minimum monthly wage of a security guard who is
considered a semi-skilled worker was `8,008/- on the date of submission of
the financial bid. Since minimum wages had to include the weekly off
replacement charges, the Petitioner calculated the total amount for
consideration of the Price Bid at `9,342.66/- (per month) without tax (as
according to standard industry practice, the minimum wages is increased by
a 1/6th share) and ` 12,752.44 with tax. Thus, the Petitioner was the only
responsive bidder as it alone included the weekly off day replacement
charges. Also, it is argued that Annexure-XI does not have a provision to
provide for minimum wages and the weekly off replacement charges
separately, which forced the Petitioner to club them together.
5. It is submitted that the Petitioner had, on release of the comparative
chart on 08.02.2013, by letter dated 11.02.2013, lodged its protest with the
Deputy Secretary (II), General Administration Department, Govt. of NCT
Delhi in which it objected that a number of security agencies who qualified
in the technical bid had under-quoted rates in clear violation of Clause 8.3
and Note 1 & 2 of Annexure-XI of the tender document. When the Petitioner
did not receive a response, it, by letters dated 13.02.2013 and 10.04.2013, lodged its protest with Mr P.C. Jain, Special Secretary, General
Administration Department, Govt. of NCT of Delhi and Sh. Arvind Ray,
Principal Secretary, Govt. of NCT of Delhi, respectively.
6. It is contended that in accordance with the requirement of Note 1 & 2
of the Price Bid for Security Services as detailed in Annexure-XI of the
tender document, rates quoted include all statutory obligations of the
contractor under Minimum Wages Act, Contract Labour (R&A) Act,
weekly-off replacement charges, cost of uniform of personnel deployed by
the contractor, all kinds of taxes, service charges etc. of the agency. Rates
quoted will be as per 8 hours per person per day. And the offers/bids which
are not in compliance of Minimum Wages Act and any other labour laws
will be treated as invalid. The Petitioner, relying on clause 9.1.4 of the
Tender Document - “the tender shall remain valid and open for acceptance
for a period of 120 days from the last date of the submission of
tender…………..” - contended that the validity of the tender had come to an
end on 28.03.2012 and was never extended by GNCT.
7. It was submitted that apart from the Petitioner there were more than
six bidders who were shortlisted as L-1. In such a situation, in terms of the
requirement of Annexure 4 of the tender document, the award of tender had
to be to the bidder who scored maximum points in technical evaluation.
Further, as per information, the maximum marks in technical evaluation
were in favour of M/s. ExMan Raghav Security Services and the second
Respondent was placed third in the technical bid. Petitioner alleged that in
order to award the contract to the second Respondent, the GNCT ignored the
terms and conditions of the contract, and also acted in a mala fide manner by
awarding the contract to second respondent.
8. It is submitted that the second respondent’s bid – as well as some
others’ bids – had to be rejected as non-responsive, because they did not
indicate the proper conditions of service, particularly the statutory amounts
payable to the workers in terms of the Employees State Insurance Act and
the Employees Provident Fund Act. Besides, crucially, the second
respondent, and other bidders found to be responsive did not indicate any
service charges. Though service charges can vary, the omission by a bidder
to indicate his service charges would be revealing, the argument proceeds.
The entire amounts, shown in the bid would then be outgoing; if the further
circumstance that the successful bidder did not claim any amounts towards
uniform and training of personnel as well as expenses for certain essential equipment were to be taken into account, the conclusion would be
inescapable that the contractor would be dipping into the wages payable to
his workers. The GNCT cannot feign ignorance on this score. Instead of
taking this seriously, the GNCT in fact awarded the contract to the second
respondent. It is lastly argued that the second respondent had quoted the
same rates for Security Guards and Supervisors. This meant that the services
offered through the Supervisors would not be really worthwhile. The GNCT
acted illegally in proceeding to award the contract nevertheless.
Respondent’s Contentions
9. The respondents argue that Security Guards fall in the semi-skilled
category and ‘Security Supervisors’ fall under non-technical and nonmatriculate
category. 1n both the cases, the minimum wages as circulated by
the Labour Department is `8008/- per month. The petitioner’s contention that
he was the only bidder to include the cost of weekly off day replacement is
unfounded. The GNCT says that had made it clear in the terms regarding
price bid for security services that:
“Note:-
1……………………….Rates quoted will include all statutory obligations of
the contractor under Minimum Wages Act, Contract Labour (R&A) Act,
weekly-off replacement charges, cost of uniform of personnel deployed by
the contractor, all kinds of taxes, service charges, etc. of the
agency……………….”.
Accordingly, it is argued that in view of this explicit stipulation in the
tender, the claim of the petitioner is absolutely unfounded.
10. The respondents argue that the 120 days period mentioned in the
tender was for the bidder to be a part of bid or to withdraw. So far as the
department is concerned there was no such time limit fixed for award of
tender. Only two bidders had collectively emerged as lowest i.e, L-1 as
under:
(i) M/s. Gaurav Enterprises
(ii) M/s. ExMan Raghav Security Services Pvt. Ltd.
The contention of the petitioner that the tender has become invalid and not
open for acceptance after 28.03.2013 since the period of 120 days has
expired, is contradicting in as the Petitioner himself is approaching the
department for award of work to him – being L-1 as per his own
calculations. 11. It was argued that the rates prevalent for Guards and Supervisors were
taken from the order dated 08.10.2012 of the Labour Department. Further,
the Department of Law and Justice was also consulted before finalization of
the tender was done. The Respondent also stated in the counter affidavit that
the rates of Employees State Insurance Corporation (ESIC) which were
applicable at the relevant time were also taken into account.
12. The private respondents argue that the omission to indicate any
service charge or provision for the cost of training or equipment did not
mean that the offers were bereft of consideration, or that the GNCT had to
necessarily infer that the amounts paid to the workers would be
misappropriated or that they would not be paid lesser amounts. Counsel
submitted that not providing or providing token amounts of service charges
would only mean that the bidder was interested in the award of contract, not
necessarily for earning any profits in the given transaction, but to make it a
part of its record.
13. Before proceeding with the discussion, it would be relevant to
reproduce the relevant tender conditions, which are as follows:
“8.3. BID PRICES:
8.3.1. Bidder shall quote the rates in Indian Rupees for the entire contract on
a ‘single responsibility’ basis such that the Tender price covers contractor’s
all obligations mentioned in or to be reasonably inferred from the Tender
document in respect of the Security Services at Vikas Bhawan —II. This
includes all the liabilities of the contractor such as cost of uniform and
identity cards of personnel deployed by the contractor and all other statutory
liabilities like Minimum Wages, ESI, PF contributions, service charges, all
kinds of taxes etc. which should be clearly stated by the contractor.
8.3.2. The rates and prices quoted by the Bidder shall be inclusive of Service
Tax.
8.3.3. The rate quoted shall be responsive and the same should be inclusive
of all Statutory obligations such as Minimum Wages, ESI, PF contributions,
wages for leave reserve, service charges, all kinds of taxes etc. The offers of
those prospective bidders which do not meet the statutory requirements are
liable to be rejected. 8.3.4. Conditional bids/offers will be summarily rejected.
XXXXXX XXXXXX XXXXXX
9. Submission of Bids:
XXXXXX XXXXXX XXXXXX
9.1.4. The tender shall remain valid and open for acceptance for a period of
120 days from the last date of submission of tender……..”
Annexure IV to the Tender conditions contains the criteria for evaluation of
technical and financial points:
“Annexure IV -
EVALUATION CRITERIA FOR TECHNICAL AND FINANCIAL
POINTS
Scoring of ten Marks will be based on Annual Turnover, Manpower on roll,
experience of running security services, volume of work performed in
preceding years, trained Security Supervisory Staff on roll, ISO certification
and other pre-qualification criterion prescribed in the Terms and Conditions
of the contract.
The firm/agency which has secured seven out of ten marks will be
considered as technically qualified. The financial bids of all the technically
qualified firms/agencies/bidders will be opened for financial evaluation.
The work will be awarded to the L-1 agency. In case the financial bid of
more than one agency is same as L-l, then the work will be awarded to the
agency which gets the maximum marks in Technical evaluation.
XXXXXX XXXXXX XXXXXX
PRICE BID FOR SECURITY SERVICES
S.no
Designation of Employee
Minimum Wages per person per month
ESI
EPF+EDLI
Bonus
Service charge*/Administrative Charges Service Tax
Total
1.
Security Guard
2.
Security Supervisor
*The rate of Service Charge quoted by the prospective bidder should be
sufficient to meet out the expenses towards cost of uniform of personnel
deployed by the contractor, cost of walkie-talkies, etc. and other incidental
expenses including training.
Note:
1. The Security Guard will be considered under the Semi-skilled category.
Contractor shall provide uniformed and trained personnel and use its best
endeavour to provide Security services to the Department for providing
safety, monitoring and surveillance. Rates quoted will include all statutory
obligations of the contractor under Minimum Wages Act, Contract Labour
(R&A) Act, weekly-off replacement charges, cost of uniform of personnel
deployed by the contractor, all kinds of taxes, service charges, etc. of the
agency. The rate quoted will be for per shift of eight hours per person per
day. 1f the minimum wages is revised by the Government of NCT of Delhi
Government of India, the incremental wages, if applicable, will be provided.
After closing date of receipt of bid, if minimum wages are revised by
Government of NCT of Delhi/Government of India, the incremental wages to the extend to minimum wages increased by Govt. of India/Govt. of Delhi
will be reimbursed to the contractor by “the Department”/GAD.
2. The offers/bids which are not in compliance of Minimum Wages Act and
any other Labour laws will be treated as invalid.”
14. The details of the rates quoted by the bidders are as follows:
Name of the Firm (M/s.)
Minimum Wages
ESI
EPF+
EDLI
Bonus
Service Charges
Service Tax
Total
Total
Monthly Expenditure
Sarvesh Security Services Pvt. Ltd.
Guard
8008.00
380.38
884.65
0.00
0.00
1146.14
10419.17
625150.22
Sup.
8008.00
380.38
884.65
0.00
0.01
1146.14
10419.18
Gaurav Enterprises Guard
8008.00
380.38
884.65
291.55
0.00
1182.18
10746.76
644805.60
Sup.
8008.00
380.38
884.65
291.55
0.00
1182.18
10746.76
Ex-Man Raghav Security Services Pvt. Ltd.
Guard
8008.00
380.38
884.65
291.55
0.00
1182.18
10746.76
644805.60
Sup.
8008.00
380.38
884.65
291.55
0.00
1182.18
10746.76
Well Protect Manpower Services Pvt. Ltd. Guard
8008.00
380.38
884.65
291.55
0.00
1182.18
10746.76
646702.90
Sup.
8814.00
418.67
884.65
291.55
0.00
1286.54
11695.41
Advance Services Pvt. Ltd.
Guard
8008.00
380.38
884.65
291.55
0.01
1182.18
10746.77
646703.46
Sup.
8814.00
418.66
884.65
291.55
0.01
1286.53
11695.40
Gorkha Security Services Guard
8008.00
380.38
884.65
291.55
478.23
1241.29
11284.10
679038.14
Sup.
8814.00
418.67
884.65
291.55
520.44
1350.86
12280.17
Scientific Security Management Services Pvt. Ltd.
Guard
9343.00
380.00
885.00
292.00
100.00
1360.00
12360.00
743800.00
Sup.
10283.00
419.00
885.00
292.00
100.00
1481.00
13460.00
MI2c Security & Facilities (P) Ltd. Guard
9342.66
443.78
1271.54
291.55
0.10
1402.81
12752.44
767647.50
Sup.
10283.00
488.44
1399.52
291.55
0.10
1540.38
14002.99
M/s. Rakshak Securities Pvt. Ltd.
Guard
464464.00
22062.04
51309.70
16916.28
1450.00
68746.24
624948.26
646498.20
Sup.
16016.00
760.76
1769.30
583.32
50.00
2370.56
21549.94
16. The question is whether the award of contract to the successful
tenderers is arbitrary and unreasonable. The first ground urged in this regard
is that even though the tender conditions required quotation of separate rates
for security guards and security supervisors, the same rates were quoted for
these two services. The grievance is that the petitioner quoted higher rates
for supervisors, and was thus placed at a disadvantage. It is also argued that
the job description and requirement of supervisors calls for higher pay. The
GNCT and respondents counter by saying that the same rates of minimum
wages have been notified for security guards and security supervisors. Here,
at the stage of evaluation of technical criteria, the relevant portion of the
tender invitation (Annexure IV) clearly indicated that marks would be
awarded under various heads, including “…………trained Security
Supervisory Staff on roll” and also at the same time, the suggested table for
quotation indicated separate rates (in separate columns) for security guards
and security supervisors. Yet, at the final evaluation, no credit or
consideration has been given to those who actually paid the security
supervisors higher wages. It is inconceivable that the two supervisors who
are expected to oversee the work of the security guards would be
nevertheless paid the same wages, despite their expertise and ability to
command and even exercise a minimum modicum of disciplinary control.
The file notings in this regard blandly deal with this aspect, dismissing the
discussion on the note that separate rates have not been notified as minimum
wages. The point here is that if the GNCT wishes that quality supervision of
the security guards is to be undertaken, an inherent standard is built into the
condition that supervisors have to be paid more than the guards. This would
assure quality of service, an objective aimed at by the tendering process. In
altogether, and without any further relevant discussion, brushing aside this
consideration and proceeding to accept bids which proposed the same wages
for both categories, the GNCT acted arbitrarily.
15. That brings the discussion to the second important aspect argued, i.e.
the weightage to be given to service charges, and whether they had to be
quoted by all the bidders. Here, the relevant condition is contained in the
note to the suggested price bid, in tabular form in Appendix-XI to the tender
documents, which states that:
“The rate of Service Charge quoted by the prospective bidder should be
sufficient to meet out the expenses towards cost of uniform of personnel
deployed by the contractor, cost of walkie-talkies, etc. and other incidental
expenses including training.” 16. There is some discussion in the official file as to whether the bids
which do not indicate any service or administrative charge component can
be called compliant and whether such offers would lead to contracts without
consideration, in view of Section 25 of the Contract Act. The legal Advisor’s
opinion was obtained; later the matter was also discussed in separate
meetings. Ultimately the Tender Evaluation Committee and the GNCT felt
that there is no legal impediment if service charges are not quoted and that
offers leading to contracts based on bids without such charges cannot be
termed illegal or void.
17. It would be essential here to recapitulate the law on public contracts.
A public agency is like any other contracting agency except that its decisions
should not be arbitrary, illegal, lacking in bona fides or based on irrelevant
considerations or overlooking relevant considerations. It usually is expected
to accept lowest bids in a publicised contract awarding process, unless such
bids are rejected for sound commercial considerations. Such considerations
could well be that the lowest tenderer’s bid is suspect as being unviable. In
this context, the Andhra Pradesh High Court, in OM Detective Security
Services v. District Collector and Chairman, Selection Committee & Anr,
AIR 2007 AP 308 held that:
“15. It is true that an agency, which invites tenders, has the discretion to
accept or reject the tenders, and even a lowest tenderer cannot insist that the
contract must be awarded to him. However, a State Agency is required to act
in an objective, fair and reasonable manner, in such matters. In case, the 1st
respondent was of the view that a tenderer must not quote commission,
below any viable figure, it ought to have mentioned the same in the tender
notification. Instances are not lacking, where, necessary stipulations are
made in the tender notification, to avoid unhealthy competitions. For
instance, in the Department of Irrigation or Roads and Buildings, for certain
categories of works, quotation of rates below a particular level, generally
15% of the estimated value, is prohibited. This is, obviously because the
quality of the work cannot be accepted with such rates. If a tender is
rejected, on the ground that the rates quoted in it are below the stipulated
level, no grievance is made out of it. In the absence of such a stipulation, the
authority cannot assume to itself, the power to draw a line and exclude from
consideration, the tenders below such line.
16. It may be true that the bona fides of a tenderer to quote 0% are very
much in doubt. But, in the context of acceptance of tender with 0.2%, where
the difference is not phenomenal, having regard to the number of posts, a transparent and objective device has to be evaluated. A decent balance must
be maintained between exclusion of unviable tenders, on the one hand, and
ensuring economical rates, on the other. It is clear that the 1st respondent did
not evaluate any objective criteria, in this regard, and the decision was
guided by abstract and unverifiable considerations. Further, the factors that
weighed with the 1st respondent are not traceable, to the tender notification.
17. Assuming that the necessity arose for the 1st respondent, to determine
the levels of viability, in the context of the meagre and nil quotations
received in response to the tender notification, an exercise ought to have
been undertaken to fix the levels of viability, in an objective and transparent
manner. Before discarding as many as five tenders, on the ground that they
were not practicable or viable, the 1st respondent was under obligation to
assess the minimum expenditure, that is needed to run and maintain an
establishment, supply and regulate as many as 333 employees. Availability
of such figures would have added objectivity to the exercise and eliminated
arbitrariness or discrimination.
18. Almost a similar situation arose in Dutta Associates's case (supra).
Tenders were invited by the Commissioner of Excise, Assam, for wholesale
supply of rectified spirit. 17 tenders were received and the rates quoted by
them ranged from Rs. 9.20ps. to 16.55ps. per litre. The Commissioner of
Excise found Rs. 15.71 ps. per litre, would be viable rate, and proceeded to
accept the tender, after undertaking negotiations. The offer of the appellant
was Rs. 11.14ps. Under those circumstances, the Supreme Court held as
under:
‘”4. After hearing the parties, we are of the opinion that the entire process
leading to the acceptance of the appellant's tender is vitiated by more than
one illegality. Firstly, the tender notice did not specify the "viability range"
nor did it say that only the tenders coming within the viability range will be
considered. More significantly, the tender notice did not even say that after
receiving the tenders, the Commissioner/Government would first determine
the "viability range" and would then call upon the lowest eligible tenderer to
make a counter-offer. The exercise of determining the viability range and
calling upon Dutta Associates to make a counter-offer on the alleged ground
that he was the lowest tenderer among the eligible tenderers is outside the
tender notice. Fairness demanded that the authority should have notified in
the tender notice itself the procedure which they proposed to adopt while
accepting the tender. They did nothing of that sort. Secondly, we have not
been able to understand the very concept of "viability range" though Shri Kapil Sibal, learned Counsel for the appellant, and the learned Counsel for
the State of Assam tried to explain it to us.’” (emphasis supplied)
18. The entire discussion in the official files in the present case hinges
around whether omission or failure to quote service charges or
administrative charges would render the resultant contract void for lack of
consideration. The importance of the note, in the tender document itself, to
the effect that “………..[s]ervice Charge quoted by the prospective bidder
should be sufficient to meet out the expenses towards cost of uniform of
personnel deployed by the contractor, cost of walkie-talkies, etc. and other
incidental expenses including training” reveals that the GNCT considered
that these charges were necessary to indicate the viability of the bid. This is
also strengthened by clause 8.3. The various expenses that were proposed to
be covered in the service charge (which is really the commission or the
consideration payable to the successful labour contractor) were:
(a) cost of uniform;
(b) cost of training
(c) cost of uniform of the personnel;
(d) walkie-talkies and other incidental expenses.
In the opinion of the Court, the above condition in the form of a note, at the
relevant place in the tender document, clarified that the GNCT expected that
the contractor would at least claim the cost of these considerable expenses.
A large number of guards had to be provided uniforms for two years, trained
and given equipment as agreed in the tender. All this naturally was to cost
some money. If a bidder were not to indicate any service charge, not only
would it imply that he is providing services without charging any amount for
the service (and paying the complete amount of what is received as wages,
ESI EPF and pension contributions), but also that he would necessarily be
put out of pocket if he were to bear the expenses towards that various
essential items which he had to furnish. The tender evaluation committee
and the GNCT did not consider the question of service charges as the basis
for these essential terms of the contract for providing outsourced security
service; instead the discussion veered only on the issue as to whether the
failure to quote such charges would result in a void contract. As noted in
Dutta Associates Pvt. Ltd. v. Indo Merchantiles Private Limited and Ors.,
1997 (1) SCC 53, the viability of bids which did not contain any such rates
itself was in question. Likewise, in Jagdish Mandal v. State of Orissa & Ors.,
(2007) 14 SCC 517, the Supreme Court emphasized that the lowest bid need
not necessarily be the one which ought to be invariably accepted and that larger public interest considerations may demand the rejection of such
offers:
“33. ……………………..Where the absurdly low rate is in regard to a
large item of work, which has to be executed at the very end, it is possible
for the committee to suspect some ulterior motive on the part of the tenderer.
If the committee felt that there was a reasonable possibility of the contractor
leaving the work midway on account of the rate quoted for the last item of
work being found to be unworkable, thereby putting the work in jeopardy, it
can certainly reject the tender as it affects the reliability of the contractor to
perform the work. Unduly low and unworkable rate or rates, is a ground for
rejection of tenders (vide Note to clause 3.5.18). The modus operandi of
quoting low rates in regard to some items of work and thereby securing the
contract and then raising disputes by making large claims, is not uncommon
among the contractors. The very purpose of constituting a committee for
scrutinizing the tenders is to find out whether any freak low rate will affect
the work if the contract is awarded to the tenderer. If the committee found
that the tender of fifth respondent should be rejected on that ground, the said
decision cannot be termed as unreasonable or arbitrary. The committee has
applied its mind and rejected the tender by assigning a reason which is
neither irrational nor arbitrary. Neither the High Court nor this Court can sit
in appeal over such technical assessment. There is no infirmity in the
decision making process or the decision.”
This Court is, therefore, of the opinion that the GNCT fell into clear error in
ignoring this crucial aspect during tender evaluation and not determining the
viability of the bids without service charges particularly in the context of
various obligations to provide uniform, training and equipment as part of the
contract.
19. The next question is whether the rates quoted did not include weekly
holiday rates. The petitioner’s argument in this regard is that the weekly
holiday rates were not factored in the successful tenderers’ bids. Here, it is
worthwhile to notice that the tender did not contain any express stipulation;
on the other hand, the minimum wages notification itself mentioned the
monthly wages (of security guards) as `8008/- and daily wages at `308. The
daily wage (for 26 days) works out at `308 only if `8008/- is divided by 26
days. Jeewanlal Limited v. Appellate Authority under the Payment of
Gratuity Act and Ors., 1984 (4) SCC 356 and Digvijay Woollen Mills Ltd.
v. Shri Mahendra Prataprai Buch, 1980 (4) SCC 106 are authorities for the
proposition that the basis for working out daily wages is dividing the monthly wages by 26 and then multiplying the same into the total number of
days of the month. This is because of the stipulation that the employee or
worker would be entitled to weekly holidays and full wages for those “off”
days. Since the monthly rate itself had been quoted, in terms of the
minimum wage notification in the present case, it cannot be said that the
successful tenderer was quoting amounts lower than minimum wages.
20. The fourth aspect which was argued by the Petitioners pertained to
Provident Fund and other benefits which were payable by the bidders. This
is embodied in Clause 8.3 of the NIT, which is reproduced again:
“8.3 The rate quoted shall be responsive and the same should be inclusive
of all Statutory obligations such as Minimum Wages, ESI, PF contributions,
wages for leave reserve, service charges, all kinds of taxes etc. The offers of
those prospective bidders which do not meet the statutory requirements are
liable to be rejected.”
The GNCT and the private respondents argue that rates quoted by the
successful bidders are in order and that any amount paid towards
emoluments in excess of `6500 each month cannot be taken into
consideration for calculation of EPF and related benefits. The petitioner, on
the other hand, submits that a reading of clause 8.3 clarifies that statutory
obligations towards ESI and PF contributions are necessarily to be met by
the bidder. It is argued that merely because minimum wages are notified to
be in excess of `6500 would not mean that the whole minimum wages –
which have to be statutorily paid by every employer – are not to be taken
into consideration for calculation of EPF benefits.
21. The GNCT’s position on this aspect is to be found at paragraph 10 of
its counter affidavit. Here, the statutory rate applicable, i.e. 13.61% of the
minimum wages, has been disclosed. At the same time the GNCT states that
any amount in excess of `6500 cannot be taken into consideration for
calculation of EPF benefits. Counsel for the contesting private respondents
echoes these arguments. Interestingly, the GNCT’s position is at variance
with the advice received by it (through the Principal Secretary, Health
Department) by the Central Provident Fund Commissioner’s letter dated
13.07.2012 (No. ACC/DL&UK/Coord/Cont.Empl/Hospital/2011 produced
as part of Annexure A to its counter affidavit) on precisely this aspect. The
Additional Commissioner stated that “4…………….[i]t is to clarify that all
employees drawing pay above `6500/- are not “excluded employees”
“7(iv)………. When a contractor changes, there is en masse termination of the employee and all settlements so done would fall under 69 (1) (d) and
hence those re-employed will not be excluded employees. Similarly, if the
employees are overtly shown to have resigned en mass on closure of
contract & the employees take settlement on having worked in a covered
establishment, the cases would fall under para 69 (1) (e) and not as in
ostensibly shown as falling in under para 69 (2) read with para 69 (5) to take
away the benefit by showing them “excluded on re-employment” on pay
above ` 6500/-…………….” The Additional Commissioner’s letter goes on
to discuss and outline the various situations when employees are treated as
“excluded” for PF benefits. Another Circular (No.
Coord/4(6)2003/Clarification/Vol-II/7394 dated 23.5.2011) issued by the
Additional Central Provident Fund Commissioner (Compliance), EPFO,
New Delhi, is to the same effect.
22. It is evident that the statutory minimum wages notified for the class of
employment concededly is `8008 per month. The arguments of the
respondents about the EPF benefits payable only to the extent of `6500/- is
because there has been no amendment in the provisions of the Employees
Provident Fund Act. The argument of the respondents, in this Court’s
opinion is unacceptable, to put it mildly. The compulsion to pay at least the
minimum wage fixed statutorily is absolute. In other words, no employer can
say that he will not pay such minimum wages. If he does pay anything less,
it is under pain of prosecution, because doing so would be committing an
offence. In fact, a person who is asked to accept wages at less than the
notified rates is considered in law and under the Constitution to be working
as “forced labour” (ref. State of Rajasthan v Sanjit Roy AIR 1983 SC 328,
“4………….where a person provides labour or service to another for
remuneration which is less than the minimum wage, the labour or service
provided by him clearly falls within the scope and ambit of the words 'forced
labour' under Article 23”). In these circumstances, for the state to
countenance an argument that amounts towards provident fund contributions
in excess of ` 6500/- may not be paid, despite no employer being able to
actually employ anyone for less than ` 8008, is indefensible. That the state
becomes a party to such complicity in accepting a contract for service in
relation to maintenance or security of public buildings, compounds the
transgression manifold. It is, therefore, held that the rates which could
properly have been considered towards contribution of PF benefits would be
13.61% of `8008/-, i.e `1092.29/- per month, and not `885/- per month. The
state, therefore, in effect became a party to a patently unfair labour practice, in accepting the bids which proposed to pay lower than the permissible rates
as contribution to Provident Fund and Pension schemes.
23. This court is conscious that its conclusions have the effect of
invalidating the award of contract to some of the respondents. There is no
doubt that a court, in its judicial review jurisdiction, exercises a limited role.
That does not include the wisdom of the decision of the Government or
executive agency which awards the contract. This court recollects the
decision of the Supreme Court in Air India Ltd. v. Cochin International
Airport Ltd & Ors. (2000) 2 SCC 617, in this context, that:
"7………………The award of a contract, whether it is by a private party or
by a public body or the State, is essentially a commercial transaction. In
arriving at a commercial decision considerations which are of paramount are
commercial considerations. The state can choose its own method to arrive at
a decision. It can fix its own terms of invitation to tender and that is not open
to judicial scrutiny. It can enter into negotiations before finally deciding to
accept one of the offers made to it. Price need not always be the sole
criterion for awarding a contract. It is free to grant any relaxation, for bona
fide reasons, if the tender conditions permit such a relaxation. It may not
accept the offer even though it happens to be the highest or the lowest. But
the State, its corporations, instrumentalities and agencies are bound to
adhere to the norms, standards and procedures laid down by them and cannot
depart from them arbitrarily. Though that decision is not amenable to
judicial review, the court can examine the decision-making process and
interfere if it is found vitiated by mala fides, unreasonableness and
arbitrariness. The State, its corporations, instrumentalities and agencies have
the public duty to be fair to all concerned. Even when some defect is found
in the decision- making process the court must exercise its discretionary
power under Article 226 with great caution and should exercise it only in
furtherance of public interest and not merely on the making out of a legal
point. The court should always keep the larger public interest in mind in
order to decide whether its intervention is called for or not. Only when it
comes to a conclusion that overwhelming public interest requires
interference, the court should intervene.”
The view that this court is taking is almost identical to what was adopted in a
recent decision of the Punjab and Haryana High Court in M/s. Gem Security
Services v. State Of Punjab and Others (on 14 February, 2013 CWP No.
1576 of 2013) to the effect that: “3. It appears that in so far as the petitioner is concerned, it had quoted only
service charges of 1.04% and did not include payment qua provident fund or
other statutory liabilities under various Labour laws like The payment of
Wages Act, 1936; The Industrial Disputes Act, 1947; The Minimum Wages
Act, 1948; The Employees' Provident Funds and Miscellaneous Provisions
Act, 1952; The Payment of Bonus Act, 1965; The Contract Labour
(Regulation and Abolition) Act, 1970; The Payment of Gratuity Act, 1972;
The Equal Remuneration Act, 1976; Punjab Industrial Establishment
(National/Casual & Festival Holidays Act, 1965); Punjab Industrial
Establishment (National & Festival Act, 1965); Bonus which is payable
under the Payment of Bonus Act, 1965 and Annual Leave with Wages under
the Factories Act, 1948, as the petitioner understood that in terms of Clause
8, these statutory liabilities would be met by the MARKFED. On the other
hand, the rate of 13.67%, quoted by the respondent No. 3, was inclusive of
all such liabilities. That was the reason for wide variation of rates quoted by
the petitioner and the respondent No. 3 respectively.
4. As per the petitioner, even if the liabilities under the aforesaid Labour
statutes, which were included by the respondent No. 3 were to be excluded
therefrom, the element of service charge quoted by the respondent No. 3
would come to around 1.04% and, therefore, the rates quoted by the
respondent No. 3 were also the same as that of the petitioner. Still, contract
was awarded to the respondent No. 3 on 01.08.2012. The petitioner made
representation there against vide his letter dated 07.08.2012. The petitioner
also met the officials of the respondent No. 2, in this behalf, stating that the
award of contract to the respondent No. 3 was clearly erroneous, inasmuch
as it is the petitioner which was L1 and had quoted the lowest rates.
..
7. The facts which emerge from the aforesaid events would disclose that in
so far as the petitioner is concerned, its bid was not found to be responsive,
primarily because of the reason that the prices quoted by the petitioner were
too low and did not appear to the Evaluation Committee to be feasible or
practical. In the orders dated 15.09.2012, vide which representation of the
petitioner was rejected by the Managing Director, referring to Clauses 8 and
9 of the NIT conditions, this reason is elaborately discussed in the following
manner:-
.....
9. It also becomes clear from the written statement filed by the respondent
No. 2 that it has taken a decision which appears to be equitable and a holistic
approach is adopted by cancelling the entire tender process and even
recalling the award of work to the respondent No. 3. Whereas, on the one hand, bid given by the petitioner @ 1.04% service charge appeared to be
illogical to the Evaluation Committee, the bid of the respondent No. 3,
which after deducting the element of service charge comes to 1.04% on the
same yardsticks, would also be illogical. Therefore, there was no reason to
award the work to the respondent No. 3 and on that very basis the bid of the
petitioner was rejected.”
24. In view of the above conclusions, the action of the GNCT of Delhi,
the first respondent, in awarding the contract to the second respondent,
whose bid was not responsive, for not indicating any service charges, and
also indicating lower rates towards PF contributions cannot be justified
in law, it is arbitrary and accordingly,
unsustainable. The award of contract and all
subsequent actions pursuant thereto are hereby quashed. It is,
however, made clear that the said second respondent shall continue to
operate the services till fresh tenders are called for and contract finalized
thereafter. The said process shall be completed within three months, and
latest by 31st December, 2013. The writ petition and pending application are
allowed in terms of the said directions, but without any order as to costs.
Sd/-
S. RAVINDRA BHAT
(JUDGE)
Sd/-
NAJMI WAZIRI
(JUDGE)
SEPTEMBER 27, 2013
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