W.P.(C)/4056/2013 of MI2C SECURITY & FACILITIES PRIVATE LIMITED Vs GOVERNMENT OF NCT & ORS.

*IN THE HIGH COURT OF DELHI AT NEW DELHI

Reserved on: 27.08.2013Decided on: 27.09.2013

+W.P.(C)4056/2013 & C.M. APPL. 9559/2013

MI2C SECURITY & FACILITIES PRIVATE LIMITED

..... PetitionerThrough : Sh. Rajesh Gogna, Advocate.versus

GOVERNMENT OF NCT & ORS...... RespondentsThrough : Sh. Deepti Gour and Sh. V.K.Tandon, Advocates,for Resp. No.1/GNCT.Sh. Tarkeshwar Nath and Sh. SaurabhTuteja, Advocates,for Resp. Nos. 2, 4 and 6.

CORAM:HON'BLE MR. JUSTICE S. RAVINDRA BHATHON'BLE MR. JUSTICE NAJMI WAZIRI

MR. JUSTICE S. RAVINDRA BHAT%

FACTS

1.In the present writ proceedings, the Petitioner, private limitedcompanyengagedinprovidingsecurityservicestovariousinstallations, challenges the award of work order dated 24.06.2013 bythe first Respondent to the second respondent (hereafter “the privaterespondent”).

2.The brief facts are that the Government of NCT of Delhi,General Administration Department (Care Taking Branch) (hereafterreferred to as “GNCT”) issued tender notice (Tender ID No.

2012_GAD_24542_1) on 08.11.2012, which was released through ane-procurement solution, inviting applicants to bid for providingsecurity services at Vikas Bhawan-II. According to the tender notice,the estimated cost of the tender was ` 1.44 crore for 2 years and thelast date/time for receipt of tenders through e-procurement was29.11.2012 till 01.00 p.m. The scheduled tender opening was on thesame day at 03.00 P.M.

3.The Petitioner, along with Respondent Nos. 2 to 9, was foundeligible for the technical bid. On 08.02.2013, the financial bid wasopened and the name of L-1 bidders pre and post tax was declared bythe GNCT. Later, the second respondent was declared as successfulbidder and was awarded the work contract by work order dated24.06.2013 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 sixthrespondent, entered appearance. The first two respondents filed theirreturn.Thesaidrespondents,whoenteredappearance,wererepresented by counsel.

Petitioners’ contentions

4.The Petitioner argues that the award of the tender to the secondrespondent is illegal and void ab initio because it is in clear violationof the terms and conditions of the tender documents, statutoryprovisions and settled principles of law. It is argued that thePetitioner, as per the requirement of Annexure XI, included the wagesfor “weekly off day” in the rates quoted. The minimum monthly wageof security guard who is considered semi-skilled worker was

`8,008/- on the date of submission of the financial bid. Sinceminimum wages had to include the weekly off replacement charges,the Petitioner calculated the total amount for consideration of thePrice Bid at `9,342.66/- (per month) without tax (as according tostandard industry practice, the minimum wages is increased by 1/6[th]share) and ` 12,752.44 with tax. Thus, the Petitioner was the onlyresponsive bidder as it alone included the weekly off day replacementcharges. Also, it is argued that Annexure-XI does not have provisionto provide for minimum wages and the weekly off replacementcharges separately, which forced the Petitioner to club them together.

5.It is submitted that the Petitioner had, on release of thecomparative chart on 08.02.2013, by letter dated 11.02.2013, lodgedits protest with the Deputy Secretary (II), General AdministrationDepartment, Govt. of NCT Delhi in which it objected that numberof security agencies who qualified in the technical bid had under-quoted rates in clear violation of Clause 8.3 and Note 1 & 2 ofAnnexure-XI of the tender document. When the Petitioner did notreceive response, it, by letters dated 13.02.2013 and 10.04.2013,lodged its protest with Mr P.C. Jain, Special Secretary, GeneralAdministration Department, Govt. of NCT of Delhi and Sh. ArvindRay, Principal Secretary, Govt. of NCT of Delhi, respectively.

6.It is contended that in accordance with the requirement of Note1 & 2 of the Price Bid for Security Services as detailed in Annexure-XI of the tender document, rates quoted include all statutoryobligations of the contractor under Minimum Wages Act, ContractLabour (R&A) Act, weekly-off replacement charges, cost of uniform

of personnel deployed by the contractor, all kinds of taxes, servicecharges etc. of the agency. Rates quoted will be as per 8 hours perperson per day. And the offers/bids which are not in compliance ofMinimum Wages Act and any other labour laws will be treated asinvalid. The Petitioner, relying on clause 9.1.4 of the TenderDocument - “the tender shall remain valid and open for acceptancefor period of 120 days from the last date of the submission oftender…………..” - contended that the validity of the tender had cometo an end on 28.03.2012 and was never extended by GNCT.

7.It was submitted that apart from the Petitioner there were morethan six bidders who were shortlisted as L-1. In such situation, interms of the requirement of Annexure 4 of the tender document, theaward of tender had to be to the bidder who scored maximum pointsin technical evaluation. Further, as per information, the maximummarks in technical evaluation were in favour of M/s. ExMan RaghavSecurity Services and the second Respondent was placed third in thetechnical bid. Petitioner alleged that in order to award the contract tothe second Respondent, the GNCT ignored the terms and conditionsof the contract, and also acted in mala fide manner by awarding thecontract to second respondent.

8.It is submitted that the second respondent’s bid – as well assome others’ bids – had to be rejected as non-responsive, because theydid not indicate the proper conditions of service, particularly thestatutory amounts payable to the workers in terms of the EmployeesState 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 servicecharges can vary, the omission by bidder to indicate his servicecharges would be revealing, the argument proceeds. The entireamounts, shown in the bid would then be outgoing; if the furthercircumstance that the successful bidder did not claim any amountstowards uniform and training of personnel as well as expenses forcertain essential equipment were to be taken into account, theconclusion would be inescapable that the contractor would be dippinginto the wages payable to his workers. The GNCT cannot feignignorance on this score. Instead of taking this seriously, the GNCT infact awarded the contract to the second respondent. It is lastly arguedthat the second respondent had quoted the same rates for SecurityGuards and Supervisors. This meant that the services offered throughthe Supervisors would not be really worthwhile. The GNCT actedillegally in proceeding to award the contract nevertheless.Respondent’s Contentions9.The respondents argue that Security Guards fall in the semi-skilled category and ‘Security Supervisors’ fall under non-technicaland non-matriculate category. 1n both the cases, the minimum wagesas circulated by the Labour Department is `8008/- per month. Thepetitioner’s contention that he was the only bidder to include the costof weekly off day replacement is unfounded. The GNCT says that hadmade it clear in the terms regarding price bid for security servicesthat:

“Note:-

1……………………….Ratesquotedwillincludeallstatutory obligations of the contractor under Minimum

Wages Act, Contract Labour (R&A) Act, weekly-offreplacement charges, cost of uniform of personneldeployed by the contractor, all kinds of taxes, servicecharges, etc. of the agency……………….”.

Accordingly, it is argued that in view of this explicit stipulation in thetender, the claim of the petitioner is absolutely unfounded.

10.The respondents argue that the 120 days period mentioned inthe tender was for the bidder to be part of bid or to withdraw. So faras the department is concerned there was no such time limit fixed foraward of tender. Only two bidders had collectively emerged as lowesti.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 invalidand not open for acceptance after 28.03.2013 since the period of 120days has expired, is contradicting in as the Petitioner himself isapproaching the department for award of work to him – being L-1 asper his own calculations.

11.It was argued that the rates prevalent for Guards andSupervisors were taken from the order dated 08.10.2012 of the LabourDepartment. Further, the Department of Law and Justice was alsoconsulted before finalization of the tender was done. The Respondentalso stated in the counter affidavit that the rates of Employees StateInsurance Corporation (ESIC) which were applicable at the relevanttime 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 didnot mean that the offers were bereft of consideration, or that theGNCT had to necessarily infer that the amounts paid to the workerswould be misappropriated or that they would not be paid lesseramounts. Counsel submitted that not providing or providing tokenamounts of service charges would only mean that the bidder wasinterested in the award of contract, not necessarily for earning anyprofits in the given transaction, but to make it part of its record.13.Before proceeding with the discussion, it would be relevant toreproduce the relevant tender conditions, which are as follows:

“8.3. BID PRICES:

8.3.1. Bidder shall quote the rates in Indian Rupees forthe entire contract on ‘single responsibility’ basis suchthat the Tender price covers contractor’s all obligationsmentioned in or to be reasonably inferred from theTender document in respect of the Security Services atVikas Bhawan —II. This includes all the liabilities of thecontractor such as cost of uniform and identity cards ofpersonnel deployed by the contractor and all otherstatutory liabilities like Minimum Wages, ESI, PFcontributions, 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 beinclusive of Service Tax.

8.3.3. The rate quoted shall be responsive and the sameshould be inclusive of all Statutory obligations such asMinimum Wages, ESI, PF contributions, wages for leavereserve, service charges, all kinds of taxes etc. The offersof those prospective bidders which do not meet thestatutory requirements are liable to be rejected.

8.3.4. Conditional bids/offers will be summarily rejected.

XXXXXXXXXXXXXXXXXX

9. Submission of Bids:

XXXXXXXXXXXXXXXXXX

9.1.4. The tender shall remain valid and open foracceptance for period of 120 days from the last date ofsubmission of tender……..”

Annexure IV to the Tender conditions contains the criteria for evaluation oftechnical and financial points:

“Annexure IV -

EVALUATION CRITERIA FOR TECHNICALAND FINANCIAL POINTS

Scoring of ten Marks will be based on Annual Turnover,Manpower on roll, experience of running securityservices, volume of work performed in preceding years,trainedSecuritySupervisoryStaffonroll,ISOcertificationandotherpre-qualificationcriterionprescribed in the Terms and Conditions of the contract.

The firm/agency which has secured seven out of tenmarks will be considered as technically qualified. Thefinancialbidsofallthetechnicallyqualifiedfirms/agencies/bidders will be opened for financialevaluation.

The work will be awarded to the L-1 agency. In case thefinancialbidofmore than one agency is same as L-l, then the work willbe awarded to the agency which gets the maximum marksin Technical evaluation.

XXXXXXXXXXXX

XXXXXX

PRICE BID FOR SECURITY SERVICES

SDesignatioMinimuESIEPF+EDLBServiceServiceTot.nofmIocharge*/AdmiTaxalnEmployeeWagesnnistrativeoperuChargespersonspermonth1Security.Guard2Security.Supervisor

*The rate of Service Charge quoted by the prospectivebidder should be sufficient to meet out the expensestowards cost of uniform of personnel deployed by thecontractor,costofwalkie-talkies,etc.andotherincidental expenses including training.

Note:

1. The Security Guard will be considered under theSemi-skilled category. Contractor shall provideuniformed and trained personnel and use its bestendeavour to provide Security services to theDepartment for providing safety, monitoring andsurveillance. Rates quoted will include all statutoryobligations of the contractor under Minimum WagesAct,ContractLabour(R&A)Act,weekly-offreplacement charges, cost of uniform of personneldeployed by the contractor, all kinds of taxes,service charges, etc. of the agency. The rate quotedwill be for per shift of eight hours per person perday. 1f the minimum wages is revised by theGovernment of NCT of Delhi Government of India,the incrementalwages,ifapplicable, willbe

provided. After closing date of receipt of bid, ifminimum wages are revised by Government of NCTof Delhi/Government of India, the incrementalwages to the extend to minimum wages increased byGovt. of India/Govt. of Delhi will be reimbursed tothe contractor by “the Department”/GAD.

2. The offers/bids which are not in compliance ofMinimum Wages Act and any other Labour lawswill be treated as invalid.”Minimum Wages Act and any other Labour lawswill be treated as invalid.”

14.The details of the rates quoted by the bidders are as follows:

16.The question is whether the award of contract to the successfultenderers is arbitrary and unreasonable. The first ground urged in this

regard is that even though the tender conditions required quotation ofseparate rates for security guards and security supervisors, the samerates were quoted for these two services. The grievance is that thepetitioner quoted higher rates for supervisors, and was thus placed at adisadvantage.It is alsoarguedthat thejobdescriptionandrequirement of supervisors calls for higher pay. The GNCT andrespondents counter by saying that the same rates of minimum wageshave been notified for security guards and security supervisors. Here,at the stage of evaluation of technical criteria, the relevant portion ofthe tender invitation (Annexure IV) clearly indicated that markswould be awarded under various heads, including “…………trainedSecurity Supervisory Staff on roll” and also at the same time, thesuggested table for quotation indicated separate rates (in separatecolumns) for security guards and security supervisors. Yet, at the finalevaluation, no credit or consideration has been given to those whoactually paid the security supervisors higher wages. It is inconceivablethat the two supervisors who are expected to oversee the work of thesecurity guards would be nevertheless paid the same wages, despitetheir expertise and ability to command and even exercise minimummodicum of disciplinary control. The file notings in this regardblandly deal with this aspect, dismissing the discussion on the notethat separate rates have not been notified as minimum wages. Thepoint here is that if the GNCT wishes that quality supervision of thesecurity guards is to be undertaken, an inherent standard is built intothe 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 relevantdiscussion, brushing aside this consideration and proceeding to acceptbids which proposed the same wages for both categories, the GNCTacted arbitrarily.

15.That brings the discussion to the second important aspectargued, i.e. the weightage to be given to service charges, and whetherthey had to be quoted by all the bidders. Here, the relevant conditionis contained in the note to the suggested price bid, in tabular form inAppendix-XI to the tender documents, which states that:

“The rate of Service Charge quoted by the prospectivebidder should be sufficient to meet out the expensestowards cost of uniform of personnel deployed by thecontractor,costofwalkie-talkies,etc.andotherincidental expenses including training.”

16.There is some discussion in the official file as to whether thebids which do not indicate any service or administrative chargecomponent can be called compliant and whether such offers wouldlead to contracts without consideration, in view of Section 25 of theContract Act. The legal Advisor’s opinion was obtained; later thematter was also discussed in separate meetings. Ultimately the TenderEvaluation Committee and the GNCT felt that there is no legalimpediment if service charges are not quoted and that offers leadingto contracts based on bids without such charges cannot be termedillegal or void.

17.It would be essential here to recapitulate the law on publiccontracts. public agency is like any other contracting agency exceptthat its decisions should not be arbitrary, illegal, lacking in bona fides

or based onirrelevantconsiderations or overlookingrelevantconsiderations. It usually is expected to accept lowest bids in apublicised contract awarding process, unless such bids are rejected forsound commercial considerations. Such considerations could well bethat the lowest tenderer’s bid is suspect as being unviable. In thiscontext, the Andhra Pradesh High Court, in OM Detective SecurityServices v. District Collector and Chairman, Selection Committee &Anr, AIR 2007 AP 308 held that:

“15. It is true that an agency, which invites tenders, hasthe discretion to accept or reject the tenders, and even alowest tenderer cannot insist that the contract must beawarded to him. However, State Agency is required toact in an objective, fair and reasonable manner, in suchmatters. In case, the 1st respondent was of the view thata tenderer must not quote commission, below any viablefigure, it ought to have mentioned the same in the tendernotification. Instances are not lacking, where, necessarystipulations are made in the tender notification, to avoidunhealthy competitions. For instance, in the Departmentof Irrigation or Roads and Buildings, for certaincategoriesofworks,quotationofratesbelowaparticular level, generally 15% of the estimated value, isprohibited. This is, obviously because the quality of thework cannot be accepted with such rates. If tender isrejected, on the ground that the rates quoted in it arebelow the stipulated level, no grievance is made out of it.In the absence of such stipulation, the authority cannotassume to itself, the power to draw line and excludefrom consideration, the tenders below such line.16.It may be true that the bona fides of tenderer toquote 0% are very much in doubt. But, in the context ofacceptance of tender with 0.2%, where the difference isnot phenomenal, having regard to the number of posts, atransparent and objective device has to be evaluated.

decent balance must be maintained between exclusion ofunviable tenders, on the one hand, and ensuringeconomical rates, on the other. It is clear that the 1strespondent did not evaluate any objective criteria, in thisregard, and the decision was guided by abstract andunverifiable considerations. Further, the factors thatweighed with the 1st respondent are not traceable, to the

tender notification.

17. Assuming that the necessity arose for the 1strespondent, to determine the levels of viability, in thecontext of the meagre and nil quotations received inresponse to the tender notification, an exercise ought tohave been undertaken to fix the levels of viability, in anobjective and transparent manner. Before discarding asmany as five tenders, on the ground that they were notpracticable or viable, the 1st respondent was underobligation to assess the minimum expenditure, that isneeded to run and maintain an establishment, supply andregulate as many as 333 employees. Availability of suchfigures would have added objectivity to the exercise andeliminated arbitrariness or discrimination.

18. Almost similar situation arose in Dutta Associates'scase (supra). Tenders were invited by the Commissionerof Excise, Assam, for wholesale supply of rectified spirit.17 tenders were received and the rates quoted by themranged from Rs. 9.20ps. to 16.55ps. per litre. TheCommissioner 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 appellantwasRs.11.14ps.Underthosecircumstances,theSupreme Court held as under:

‘”4. After hearing the parties, we are of theopinion that the entire process leading to theacceptance of the appellant's tender is vitiated bymore than one illegality. Firstly, the tender noticedid not specify the "viability range" nor did it saythat only the tenders coming within the viabilityrange will be considered. More significantly, the

tender notice did not even say that after receivingthe tenders, the Commissioner/Government wouldfirst determine the "viability range" and wouldthen call upon the lowest eligible tenderer to makea counter-offer. The exercise of determining theviability range and calling upon Dutta Associatesto make counter-offer on the alleged ground thathe was the lowest tenderer among the eligibletenderers is outside the tender notice. Fairnessdemanded that the authority should have notifiedin the tender notice itself the procedure which theyproposed to adopt while accepting the tender.They did nothing of that sort. Secondly, we havenot been able to understand the very concept of"viability range" though Shri Kapil Sibal, learnedCounsel for the appellant, and the learned Counselfor the State of Assam tried to explain it to us.’”(emphasis supplied)

18.The entire discussion in the official files in the present casehinges around whether omission or failure to quote service charges oradministrative charges would render the resultant contract void forlack of consideration. The importance of the note, in the tenderdocument itself, to the effect that “………..[s]ervice Charge quotedby the prospective bidder should be sufficient to meet out the expensestowards cost of uniform of personnel deployed by the contractor, costof walkie-talkies, etc. and other incidental expenses includingtraining” reveals that the GNCT considered that these charges werenecessary to indicate the viability of the bid. This is also strengthenedby clause 8.3. The various expenses that were proposed to be coveredin the service charge (which is really the commission or theconsideration 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 note,

at the relevant place in the tender document, clarified that the GNCTexpected that the contractor would at least claim the cost of theseconsiderable expenses. large number of guards had to be provideduniforms for two years, trained and given equipment as agreed in thetender. All this naturally was to cost some money. If bidder were notto indicate any service charge, not only would it imply that he isproviding services without charging any amount for the service (andpaying the complete amount of what is received as wages, ESI EPFand pension contributions), but also that he would necessarily be putout of pocket if he were to bear the expenses towards that variousessential items which he had to furnish. The tender evaluationcommittee and the GNCT did not consider the question of servicecharges as the basis for these essential terms of the contract forproviding outsourced security service; instead the discussion veeredonly on the issue as to whether the failure to quote such chargeswould result in void contract. As noted in Dutta Associates Pvt. Ltd.v. Indo Merchantiles Private Limited and Ors., 1997 (1) SCC 53, theviability of bids which did not contain any such rates itself was inquestion. Likewise, in Jagdish Mandal v. State of Orissa & Ors.,(2007) 14 SCC 517, the Supreme Court emphasized that the lowestbid need not necessarily be the one which ought to be invariablyaccepted and that larger public interest considerations may demandthe rejection of such offers:

“33. ……………………..Where the absurdly low rate isin regard to large item of work, which has to beexecuted at the very end, it is possible for the committeeto suspect some ulterior motive on the part of thetenderer.Ifthecommitteefeltthattherewasareasonable possibility of the contractor leaving the workmidway on account of the rate quoted for the last item ofwork being found to be unworkable, thereby putting thework in jeopardy, it can certainly reject the tender as itaffects the reliability of the contractor to perform thework. Unduly low and unworkable rate or rates, is aground for rejection of tenders (vide Note to clause3.5.18). The modus operandi of quoting low rates inregard to some items of work and thereby securing thecontract and then raising disputes by making largeclaims, is not uncommon among the contractors. Thevery purpose of constituting committee for scrutinizingthe tenders is to find out whether any freak low rate willaffect the work if the contract is awarded to the tenderer.If the committee found that the tender of fifth respondentshould be rejected on that ground, the said decisioncannot be termed as unreasonable or arbitrary. Thecommittee has applied its mind and rejected the tenderby assigning reason which is neither irrational norarbitrary. Neither the High Court nor this Court can sitin appeal over such technical assessment. There is noinfirmity in the decision making process or the decision.”

This Court is, therefore, of the opinion that the GNCT fell into clearerror in ignoring this crucial aspect during tender evaluation and notdetermining the viability of the bids without service chargesparticularly 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 includeweekly 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 containany express stipulation; on the other hand, the minimum wagesnotification 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. JeewanlalLimited v.Appellate Authority under the Payment of Gratuity Act andOrs.,1984 (4) SCC 356 and Digvijay Woollen Mills Ltd. v. ShriMahendra Prataprai Buch, 1980 (4) SCC 106 are authorities for theproposition that the basis for working out daily wages is dividing themonthly wages by 26 and then multiplying the same into the totalnumber of days of the month. This is because of the stipulation thatthe employee or worker would be entitled to weekly holidays and fullwages for those “off” days. Since the monthly rate itself had beenquoted, in terms of the minimum wage notification in the presentcase, it cannot be said that the successful tenderer was quotingamounts lower than minimum wages.

20.The fourth aspect which was argued by the Petitionerspertained to Provident Fund and other benefits which were payable bythe bidders. This is embodied in Clause 8.3 of the NIT, which isreproduced again:

“8.3 The rate quoted shall be responsive and the sameshould be inclusive of all Statutory obligations such asMinimum Wages, ESI, PF contributions, wages for leavereserve, service charges, all kinds of taxes etc. The offersof those prospective bidders which do not meet thestatutory requirements are liable to be rejected.”

The GNCT and the private respondents argue that rates quoted by thesuccessful bidders are in order and that any amount paid towardsemoluments in excess of `6500 each month cannot be taken intoconsideration for calculation of EPF and related benefits. Thepetitioner, on the other hand, submits that reading of clause 8.3clarifies that statutory obligations towards ESI and PF contributionsare necessarily to be met by the bidder. It is argued that merelybecause minimum wages are notified to be in excess of `6500 wouldnot mean that the whole minimum wages – which have to bestatutorily paid by every employer – are not to be taken intoconsideration for calculation of EPF benefits.21.The GNCT’s position on this aspect is to be found at paragraph10 of its counter affidavit. Here, the statutory rate applicable, i.e.13.61% of the minimum wages, has been disclosed. At the same timethe GNCT states that any amount in excess of `6500 cannot be takeninto consideration for calculation of EPF benefits. Counsel for thecontesting 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 CentralProvidentFundCommissioner’sletterdated13.07.2012(No.ACC/DL&UK/Coord/Cont.Empl/Hospital/2011 produced as part ofAnnexure to its counter affidavit) on precisely this aspect. TheAdditional Commissioner stated that “4…………….[i]t is to clarifythat all employees drawing pay above `6500/- are not “excludedemployees” “7(iv)………. When contractor changes, there is enmasse termination of the employee and all settlements so done wouldfall under 69 (1) (d) and hence those re-employed will not beexcluded employees. Similarly, if the employees are overtly shown tohave resigned en mass on closure of contract & the employees takesettlement on having worked in covered establishment, the caseswould fall under para 69 (1) (e) and not as in ostensibly shown asfalling in under para 69 (2) read with para 69 (5) to take away thebenefit by showing them “excluded on re-employment” on pay above` 6500/-…………….” The Additional Commissioner’s letter goes onto discuss and outline the various situations when employees aretreated as “excluded” for PF benefits. Another Circular (No.Coord/4(6)2003/Clarification/Vol-II/7394 dated 23.5.2011) issued bythe 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 theclass of employment concededly is `8008 per month. The argumentsof the respondents about the EPF benefits payable only to the extentof `6500/- is because there has been no amendment in the provisionsof the Employees Provident Fund Act. The argument of therespondents, in this Court’s opinion is unacceptable, to put it mildly.The compulsion to pay at least the minimum wage fixed statutorily isabsolute. In other words, no employer can say that he will not paysuch minimum wages. If he does pay anything less, it is under pain ofprosecution, because doing so would be committing an offence. Infact, person who is asked to accept wages at less than the notifiedrates 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 person provides labour or service toanother for remuneration which is less than the minimum wage, thelabour or service provided by him clearly falls within the scope andambit of the words 'forced labour' under Article 23”). In thesecircumstances, for the state to countenance an argument that amountstowards provident fund contributions in excess of ` 6500/- may not bepaid, despite no employer being able to actually employ anyone forless than ` 8008, is indefensible. That the state becomes party tosuch complicity in accepting contract for service in relation tomaintenanceorsecurityofpublicbuildings,compoundsthetransgression manifold. It is, therefore, held that the rates which couldproperly have been considered towards contribution of PF benefitswould be 13.61% of `8008/-, i.e `1092.29/- per month, and not `885/-per month. The state, therefore, in effect became party to patentlyunfair labour practice, in accepting the bids which proposed to paylower than the permissible rates as contribution to Provident Fund andPension schemes.

23.This court is conscious that its conclusions have the effect ofinvalidating the award of contract to some of the respondents. There isno doubt that court, in its judicial review jurisdiction, exercises alimited role. That does not include the wisdom of the decision of theGovernment or executive agency which awards the contract. Thiscourt recollects the decision of the Supreme Court in Air India Ltd. v.Cochin International Airport Ltd & Ors. (2000) 2 SCC 617, in thiscontext, that:

"7………………The award of contract, whether it is by

private party or by public body or the State, isessentially commercial transaction. In arriving at acommercialdecisionconsiderationswhichareofparamount are commercial considerations. The state canchoose its own method to arrive at decision. It can fixits own terms of invitation to tender and that is not opento judicial scrutiny. It can enter into negotiations beforefinally deciding to accept one of the offers made to it.Price need not always be the sole criterion for awardinga contract. It is free to grant any relaxation, for bona fidereasons,ifthetenderconditionspermitsucharelaxation. It may not accept the offer even though ithappens to be the highest or the lowest. But the State, itscorporations, instrumentalities and agencies are boundto adhere to the norms, standards and procedures laiddown 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 andinterfereifitisfoundvitiatedbymalafides,unreasonablenessandarbitrariness.TheState,itscorporations, instrumentalities and agencies have thepublic duty to be fair to all concerned. Even when somedefect is found in the decision- making process the courtmust exercise its discretionary power under Article 226with great caution and should exercise it only infurtherance of public interest and not merely on themaking out of legal point.The court should alwayskeep the larger public interest in mind in order to decidewhether its intervention is called for or not. Only when itcomes to conclusion that overwhelming public interestrequires interference, the court should intervene.”

The view that this court is taking is almost identical to what wasadopted in recent decision of the Punjab and Haryana High Court inM/s. Gem Security Services v. State Of Punjab and Others (on 14February, 2013 CWP No. 1576 of 2013) to the effect that:

“3. It appears that in so far as the petitioner isconcerned, it had quoted only service charges of 1.04%and did not include payment qua provident fund or otherstatutory liabilities under various Labour laws like Thepayment of Wages Act, 1936; The Industrial DisputesAct,1947;TheMinimumWagesAct,1948;TheEmployees'ProvidentFundsandMiscellaneousProvisions Act, 1952; The Payment of Bonus Act, 1965;The Contract Labour (Regulation and Abolition) Act,1970; The Payment of Gratuity Act, 1972; The EqualRemunerationAct,1976;PunjabIndustrialEstablishment (National/Casual & Festival Holidays Act,1965); Punjab Industrial Establishment (National &Festival Act, 1965); Bonus which is payable under thePayment of Bonus Act, 1965 and Annual Leave withWages under the Factories Act, 1948, as the petitionerunderstood that in terms of Clause 8, these statutoryliabilities would be met by the MARKFED. On the otherhand, the rate of 13.67%, quoted by the respondent No.3, was inclusive of all such liabilities. That was thereason for wide variation of rates quoted by thepetitioner and the respondent No. 3 respectively.4. As per the petitioner, even if the liabilities under theaforesaid Labour statutes, which were included by therespondent No. 3 were to be excluded therefrom, theelement of service charge quoted by the respondent No. 3would come to around 1.04% and, therefore, the ratesquoted by the respondent No. 3 were also the same asthat of the petitioner. Still, contract was awarded to therespondent No. 3 on 01.08.2012. The petitioner maderepresentationthereagainstvidehisletterdated07.08.2012. The petitioner also met the officials of therespondent No. 2, in this behalf, stating that the award ofcontract to the respondent No. 3 was clearly erroneous,inasmuch as it is the petitioner which was L1 and hadquoted the lowest rates...

7. The facts which emerge from the aforesaid events

would disclose that in so far as the petitioner isconcerned, its bid was not found to be responsive,primarily because of the reason that the prices quoted bythe petitioner were too low and did not appear to theEvaluation Committee to be feasible or practical. In theorders dated 15.09.2012, vide which representation ofthe petitioner was rejected by the Managing Director,referring to Clauses 8 and 9 of the NIT conditions, thisreason is elaborately discussed in the following manner:-.....

9. It also becomes clear from the written statement filedby the respondent No. 2 that it has taken decisionwhich appears to be equitable and holistic approach isadopted by cancelling the entire tender process and evenrecalling 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 theEvaluation Committee, the bid of the respondent No. 3,which after deducting the element of service chargecomes to 1.04% on the same yardsticks, would also beillogical. Therefore, there was no reason to award thework to the respondent No. 3 and on that very basis thebid of the petitioner was rejected.”

24.In view of the above conclusions, the action of the GNCT ofDelhi, the first respondent, in awarding the contract to the secondrespondent, whose bid was not responsive, for not indicating anyservicecharges,andalsoindicatinglowerratestowardsPFcontributionscannotbejustifiedinlaw,itisarbitraryandaccordingly,unsustainable.Theawardofcontract andallsubsequentactionspursuantthereto are hereby quashed. It is, however, made clear thatthe said second respondent shall continue to operate the services tillfresh tenders are called for and contract finalized thereafter. The said

process shall be completed within three months, and latest by 31[st]December, 2013. The writ petition and pending application areallowed in terms of the said directions, but without any order as tocosts.

S. RAVINDRA BHAT(JUDGE)

SEPTEMBER 27, 2013‘ajk’

NAJMI WAZIRI(JUDGE)