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Tuesday, July 26, 2016

Cases involving blacklisting or imposition of penal consequences on a tenderer/ contractor or distribution of State largesse (allotment of sites/shops, grant of licences, dealerships and franchises) stand on a different footing as they may require a higher degree of fairness in action.”[Para 21]- Respondent No.1 before us has clearly violated the strict terms of the tender condition on every occasion and hence cannot be given relief. And, secondly, we already find that due to litigation the present tender has not taken off for over one year. In the absence of malafides, and indeed the High Court judgment has found that malafides did not vitiate the calculation of minimum wage by the Labour Department, we cannot accept Shri Divan’s submission that the figure of Rs.2,91,00,000/- was tailor made to suit the bid offered by the Appellant herein. We, therefore, set aside the decision of the Gujarat High Court and allow the Government to proceed further in finalizing the tender in favour of the Appellant herein. The appeal is, accordingly, allowed with no order as to costs.


                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                       CIVIL APPEAL NO.  6978 of 2016
                (ARISING OUT OF SLP (CIVIL) NO.5695 OF 2016)

SERVICES PVT. LTD.                           …APPELLANT


AND ORS.                                     …RESPONDENTS

                           J  U  D  G  M  E  N  T

R.F. Nariman, J.

1.    Leave granted.

2.    On 20.11.2014, the Commissioner of Transport, Government  of  Gujarat,
floated a tender seeking  bids  for  services  inter  alia  of  supervisors,
computer programmers, data entry operators, and electrician staff at 11  RTO
check-posts.  A few material clauses of the tender are set out hereinbelow:-

      “2.5.5 Commercials

      The Commercial Bids should strictly conform to  the  formats  provided
in Annexure 2 of this tender document.

2.5.6 Fixed Price

      Prices quoted by the Bidder shall be fixed and no  variation  will  be
allowed under any circumstances during the entire  period  of  the  project.
No open-ended Bid shall  be  entertained  and  the  same  is  liable  to  be
rejected straightaway.

2.8.3 Rejection of Bid

      The hard-bound copy of Technical Bid Document shall  be  submitted  in
the form of printed document.  Bids submitted by Telex, fax or  email  shall
not be entertained.  Any bid not  secured  in  accordance  with  Clause  2.8
mentioned  above,  shall  be   rejected   by   COT   without   any   further
correspondence, as non-responsive.  A  bid  that  does  not  meet  all  pre-
qualification criteria or is not  responsive  or  not  fulfilling  technical
evaluation shall be rejected by  COT,  and  may  not  subsequently  be  made
responsive by correction or withdrawal of the  non-conforming  deviation  or
reservation by the Bidder.


      It shall  be  the  responsibility  of  the  Bidder  to  abide  by  the
provisions of the labour welfare legislations, like  The  Payment  of  Wages
Act, 1936, The Payment of Bonus Act, 1965, The Minimum Wages Act, 1948,  The
Equal Remuneration Act,  1976,  The  Payment  of  Gratuity  Act,  1972,  The
Employees’  State  Insurance  Act,  1948,  Contract  Labor  Act,  1970,  The
Workmen’s Compensation Act, 1923 and other similar legislations, rules,  and
orders as issued from time to time.

Annexure – 2 (Financial Bid)

Format for Financial Bid

Price Bid: (Financial/Commercial Bid submitted in  physical  form  shall  be
liable  for  rejection.    It   should   be   submitted   online   only   at

Please provide price  bid  for  supply  of  Man  Power  to  be  deployed  at
different Check-posts/CMC.

|Sr. No.  |Particulars      |Qty      |Cost per     |Total cost for |
|         |                 |         |person per   |24 months      |
|         |                 |         |month without|without tax    |
|         |                 |         |tax          |               |
|1        |Data Entry       |120      |             |               |
|         |operator         |         |             |               |
|2        |Computer Engineer|02       |             |               |
|3        |Electrician      |12       |             |               |
|4        |Supervisor       |12       |             |               |
|         |Total            |         |             |               |
|Additional Service Tax      |%        |             |               |
|Grand Total                                         |               |

Salary paid to the deployed manpower should not be  less  than  the  minimum
wages published as  per  the  notification  issued  by  state  govt.  labour
department or other statutory benefits applicable. In case  of  revision  of
minimum wages/DA by the labour department, agency would be entitled  to  get
the revised rates from Commissioner of transport.

2.    Break-up of salary for each category of employee  should  be  provided
indicating clearly the wages, DA, other mandatory statutory benefits  &  the
service charges.

If the component of salary quoted is less than the minimum wages  prescribed
or the components of mandatory statutory benefits are not  included  in  the
break-up, the bid is liable to be rejected.

The quantity of manpower required may vary and the supplier may be asked  to
supply upto 25% extra manpower at the rate quoted above.

L1 will be decided on grand total.

Signature:                                   Date:
Designation:                                       Seal:”

3.    The  financial  bids  were  opened  on  10.12.2014.   9  bidders  gave
financial bids of which only three were qualified.  The Appellant bid for  a
total amount of Rs.2,92,93,944/-; Respondent No.1 bid for  Rs.2,77,68,000/-,
and one Airan Consultants Pvt. Ltd. made a bid for Rs.3,03,83,184/-.

4.    On 26.2.2015, the Technical Evaluation Committee,  after  taking  into
account the opinion of the Labour Department,  arrived  at  a  minimum  wage
figure of Rs.3,00,92,346/-.  Inasmuch as  both  the  Appellant  as  well  as
Respondent No.1 gave bids  which  were  below  this  figure,  (which  would,
therefore,   be  less  than  the  amount  required  as  minimum  wages,   in
accordance with the tender conditions read with  the  Annexure  2  thereof),
both the Appellant as well as Respondent No.1 were held  to  be  ineligible.
A decision was, therefore, taken to award the tender to  the  third  bidder,
namely, M/s Airan Consultants Pvt.  Ltd.   Respondent  No.1  approached  the
Gujarat High Court in a writ petition challenging  the  aforesaid  decision.
By its judgment dated 11.8.2015, the  High  Court  ultimately  came  to  the
conclusion that the tender in favour of  M/s  Airan  Consultants  Pvt.  Ltd.
ought to be quashed and set  aside  with  the  further  direction  that  the
Government of Gujarat shall give an opportunity to all  three  tenderers  to
resubmit their bids after being appraised of the minimum wage  figure  given
by the Labour Department.  This was done  as  the  High  Court  was  of  the
opinion that all the bidders ought to have  been  given  an  opportunity  to
revise their bills subsequent to the minimum wage calculated by  the  Labour

5.    In pursuance of the aforesaid judgment, the  Transport  Department  of
the Government of Gujarat furnished to all the competing bidders the  Labour
Department’s calculation that minimum  wages  plus  bonus  payable  for  the
contract was Rs.3,00,92,346/-.

6.    In  response  to  the  above,  the  Appellant  wrote  a  letter  dated
2.11.2015 sticking to the  original  bid  figure  of  Rs.2,92,93,944/-.   On
3.9.2015,  Respondent  No.1,  in  response  to  the  minimum   wage   figure
disclosed, wrote to the Government of Gujarat, as follows:-

“(6.3)      Thus, it can be seen that according to the calculation,  Minimum
Wages and other statutory benefits payable to the employees for 730 days  [2
years of contract] comes  to  Rs.3,00,92,346  [without  service  tax].   The
price at which I am ready to work is Rs.2,77,68,000 [without  service  tax].
Thus,  against  payment   of   wages   and   all   statutory   benefits   of
Rs.3,00,92,346/- and service tax thereon, am ready  and  willing  to  accept
Rs.2,77,68,000 [plus service tax] from the Government.   This  would  enable
the Government to save Rs.23,24,346.00 and  service  tax  thereon,  and  the
ultimate beneficiary would be public exchequer.

(6.4) I have undertaken in past in writing that I am ready to incur loss  as
well.  The price I have offered  shall  have  no  impediment  on  wages  and
statutory benefits to  be  paid  to  the  employees  as  calculated  by  the
Technical Evaluation Committee based on the report/ opinion  of  the  Labour
Commissioner.  The tender document itself binds the contractor to  abide  by
all labour welfare legislation, and  therefore,  there  is  no  question  of
resiling from performing that part of contract from my end.

(6.5) Even in my previous letters also,  I  have  undertaken  that  I  shall
conform  to  all  labour   welfare   legislations   even   after   accepting
Rs.2,77,68,000 + Service Tax from the Government.  I  have  also  undertaken
that I shall bear the burden of loss  incurred  on  account  of  the  margin
between my bid and the  amount  of  minimum  wages  and  statutory  benefits
payable to my employees.  The margin between the two shall not be  hindrance
in quality of services I would offer through my employees  on  these  check-

(6.6) Without prejudice to above, I am to state that I am  ready  to  accept
even Rs.3,00,92,346.00 + Service Tax, being the bare minimum  wages  payable
to the employees during the life of the  contract  from  the  Government  as
calculated by the Technical Evaluation Committee based on the report of  the
Labour Commissioner, such  offer  will  result  into  ‘No  Profit  No  Loss’
business for me, but  at  the  same  time,  it  would  create  a  burden  of
Rs.23,24,346.00 on the State Funds.”

7.    On 12.10.2015, the  Labour  Department  gave  a  second  opinion  that
though Data Entry  Operators  are  ordinarily  to  be  treated  as  “skilled
workers”, for the purpose of the present tender they should  be  treated  as
“semi skilled workers”.  In  view  of  this  decision,  the  Government,  on
30.10.2015, arrived at a decision that the actual minimum  wage  plus  bonus
worked out to Rs.2,91,00,000/-, and thus revised  their  earlier  figure  of
Rs.3,00,92,346/-.  In the judgment under appeal, the High Court has  stated,
and it is not controverted before us, that this figure was not disclosed  to
either party.

8.    On 2.11.2015, Respondent No.1 again knocked at the doors of  the  High
Court in a second writ petition filed  by  it.   By  the  impugned  judgment
dated 22.2.2016, the High Court allowed Respondent no.1’s  petition  in  the
following terms:-

“8.   Under the circumstances, the decision of the authorities to  shortlist
respondent No.3 for awarding the contract is set aside.  The  offer  of  the
petitioner shall be treated  as  matching  with  the  revised  minimum  wage
calculation.  The petitioner shall give such  offer  in  clear  writing  and
undertaking  to  the  authorities  latest  by  25.2.2016.   The   respondent
authorities, unless there is any other disqualification  of  the  petitioner
to carry out the contract, being the lower, shall accept the same.

9.    Petition is disposed of.”

9.    Being aggrieved by the aforesaid judgment,  the  Appellant  is  before

10.   Shri Harin Raval, learned senior advocate appearing on behalf  of  the
Appellant, has pointedly referred to the tender conditions  and  has  argued
before us that Respondent No.1’s writ petition was not at  all  maintainable
in view of the fact that Respondent No.1  stuck  to  its  earlier  offer  of
Rs.2,77,68,000/- which was lower than  the  figure  of  Rs.3,00,92,346/-  as
well as the figure of Rs.2,91,00,000/- fixed by the Government  upon  advice
given by the Labour Department, of minimum wage plus  bonus.   According  to
him, the without prejudice offer of Rs.3,00,92,346/- flew  in  the  face  of
the  tender  conditions  and,  therefore,  the  writ  petition   being   not
maintainable, ought to have  been dismissed both  on  the  ground  that  the
figure quoted by Respondent No.1 was below the minimum wage  fixed  as  also
on the ground that no open ended  bid  is  liable  to  be  entertained.   He
further argued that the Court cannot make a contract between the parties  by
treating the offer of the  Respondent  No.1  as  matched  with  the  revised
minimum wage calculation.  He further  argued  that  a  Mandamus  cannot  be
issued to straightaway award the tender to a person who does not conform  to
the essential conditions of the tender.

11.    Countering  these  submissions,  Shri  Shyam  Divan,  learned  senior
counsel appearing on behalf of Respondent No.1, has argued  that  it  is  an
admitted fact that the revised figure of minimum wage  was  never  disclosed
to either of the parties and this being so, the  judgment  under  appeal  is
correct.  He also stated that though the High Court did not find  malafides,
yet it went out of its way to comment on the  secret  manner  in  which  the
Labour Department re-fixed the minimum wage at  Rs.2,91,00,000/-,  which  is
only one lakh above the Appellant’s figure  of  Rs.2,92,00,000/-  and  that,
therefore, the said non-transparent process rendered  the  decision  of  the
Government to award the tender to the Appellant as bad in law.   He  further
argued that if the offer of the Respondent  No.1  was  treated  as  matching
with the revised minimum wage calculation, the  State  will  benefit  by  an
amount of Rs.1 lakh and that this was well  within  the  discretion  of  the
High  Court  while  exercising  jurisdiction  under  Article  226   of   the

 12.  Having heard learned counsel for  the  parties,  we  agree  with  Shri
Raval’s contention that Respondent No.1’s bid was contrary to the  terms  of
the tender.

13.   First and foremost, under  tender  condition  2.5.5,  commercial  bids
have to strictly conform to the format provided in Annexure 2 of the  tender
document.  Annexure 2 which contains the format for the price bid  makes  it
clear that the salary paid to deployed manpower should not be less than  the
minimum wage.  It further goes on to state in paragraph 3  thereof  that  if
the component of salary quoted is less than  the  minimum  wage  prescribed,
the bid is liable to be rejected.  On this ground alone,  Respondent  No.1‘s
bid is liable to be rejected inasmuch as, vide its  letter  dated  3.9.2015,
Respondent No.1 stuck to its original figure of  Rs.2,77,68,000/-  which  is
way below the minimum wage fixed by the Government. Secondly, Shri Raval  is
also right in stating that the without prejudice offer  of  Rs.3,00,92,346/-
is an offer which is not fixed, but open ended.   This  is  clear  from  the
fact that it was up to the Government then to pick up either figure  by  way
of acceptance.  This is clearly interdicted by clause 2.5.6  of  the  tender
which states that prices quoted by the bidder have to be fixed, and no  open
ended bid  can  be  entertained,  the  same  being  liable  to  be  rejected
straightaway. Such condition is obviously  an  essential  condition  of  the
tender which goes to the eligibility of persons who make  offers  under  the

14.   Unfortunately, even though the  High  Court  noticed  the  open  ended
nature of Respondent No.1’s bid, it  went  on  to  add  that  the  offer  of
Respondent No.1 shall be treated as matching with the revised  minimum  wage
calculation and that it is nowhere envisaged by the tender  conditions  that
rejection of an offer which may have the potential of causing  loss  to  the
tenderer is present.  It is not for the High Court to revisit  a   condition
contained in Annexure 2  read  with  2.5.5  of  the  tender  in  the  manner
aforesaid.  Once the tender condition states that the tender  must  strictly
conform to the format provided  in  Annexure  2,  and  Annexure  2  in  turn
clearly states that if the component of  salary  quoted  is  less  than  the
minimum wage prescribed, the bid is liable to  be  rejected,  and  the  High
Court  cannot  hold  otherwise.   The  High  Court’s  further  finding  that
Respondent No.1’s offer was “clear” is wholly incorrect.  It was  a  without
prejudice offer which muddied the waters and rendered the  price  quoted  by
the bidder as variable and not fixed.

15.   The law is settled that an essential condition of a tender has  to  be
strictly complied with. In Poddar Steel Corpn. v. Ganesh Engineering  Works,
(1991) 3 SCC 273, this Court held as under:-

“…  The  requirements  in  a  tender  notice  can  be  classified  into  two
categories — those which lay down the essential  conditions  of  eligibility
and the others which are  merely  ancillary  or  subsidiary  with  the  main
object to be achieved by the condition. In  the  first  case  the  authority
issuing the tender may be required to enforce them  rigidly.  In  the  other
cases it must be open to the authority to deviate from  and  not  to  insist
upon the strict literal compliance of the condition in appropriate  cases….”
[para 6]

16.   Similarly in B.S.N. Joshi & Sons Ltd.  v.  Nair  Coal  Services  Ltd.,
(2006) 11 SCC 548, this Court held as under:-

“…(i) if there are essential conditions, the same must be adhered to;

(ii) if there is no power of general relaxation, ordinarily the  same  shall
not be exercised and the principle of strict  compliance  would  be  applied
where it is possible for all the parties to comply with all such  conditions

(iii) if, however, a deviation is made in relation to  all  the  parties  in
regard to any of such conditions, ordinarily again  a  power  of  relaxation
may be held to be existing;

(iv) the parties who have taken the benefit of such  relaxation  should  not
ordinarily be allowed to take a different stand in  relation  to  compliance
with another part of tender contract, particularly when the was also not  in
a position to comply with all the conditions of  tender  fully,  unless  the
court otherwise finds relaxation of a condition  which  being  essential  in
nature could not be relaxed  and  thus  the  same  was  wholly  illegal  and
without jurisdiction;

(v) when  a  decision  is  taken  by  the  appropriate  authority  upon  due
consideration of the tender document  submitted  by  all  the  tenderers  on
their own merits and if it is ultimately found that successful  bidders  had
in fact substantially  complied  with  the  purport  and  object  for  which
essential conditions  were  laid  down,  the  same  may  not  ordinarily  be
interfered with; …” [para 66]

17.   We also agree  with  the  contention  of  Shri  Raval  that  the  writ
jurisdiction cannot be utilized to make a fresh bargain between parties.

18. In General Assurance Society Ltd. V. Chandmull Jain, (1996) 3  SCR  500,
this Court, in a slightly different context, stated:
“In other respects there is no difference between a  contract  of  insurance
and any other contract except that in a contract of  insurance  there  is  a
requirement of uberrima fides i.e. good faith on the  part  of  the  assured
and the contract  is  likely  to  be  construed contra  proferentem that  is
against the company in case of ambiguity or  doubt.  A  contract  is  formed
when there is an unqualified acceptance of the proposal. Acceptance  may  be
expressed in writing or it may even be implied if the  insurer  accepts  the
premium and retains it. In the case of the assured, a positive  act  on  his
part by which he recognises or seeks to enforce the  policy  amounts  to  an
affirmation of it. This position  was  clearly  recognised  by  the  assured
himself, because he wrote, close upon the expiry of the time  of  the  cover
notes that either a policy should be issued to him before  that  period  had
expired or the  cover  note  extended  in  time. In  interpreting  documents
relating to a contract of insurance, the duty of the court is  to  interpret
the words in which the contract is expressed by the parties, because  it  is
not for the court to  make  a  new  contract,  however  reasonable,  if  the
parties have not made it themselves. Looking at the proposal, the letter  of
acceptance and the cover notes, it is clear that  a  contract  of  insurance
under the standard policy for fire and  extended  to  cover  flood,  cyclone
etc. had come into being.”

19.   In the light of  the  aforesaid  judgment,  the  High  Court  was  not
correct in treating Respondent No.1’s offer as  matching  with  the  revised
minimum wage calculation, as that would make  a  new  contract  between  the
parties that the parties have not made themselves.

 20.  It is also well to remember the admonition  given  by  this  Court  in
Michigan Rubber (India) Limited v. State of Karnataka and Others,  (2012)  8
SCC 216 in cases like the present, as under:-

 “In Jagdish Mandal v. State of Orissa, [(2007) 14 SCC 517],  the  following
conclusion is relevant:

 “22. Judicial review  of  administrative  action  is  intended  to  prevent
arbitrariness, irrationality, unreasonableness, bias  and  mala  fides.  Its
purpose is to check whether choice or decision is made  ‘lawfully’  and  not
to check whether choice or decision is ‘sound’. When the power  of  judicial
review is invoked in matters relating to  tenders  or  award  of  contracts,
certain  special  features  should  be  borne  in  mind.  A  contract  is  a
commercial  transaction.  Evaluating  tenders  and  awarding  contracts  are
essentially commercial functions. Principles of equity and  natural  justice
stay at a distance. If the decision relating to award of  contract  is  bona
fide and is in public interest, courts will not, in  exercise  of  power  of
judicial review, interfere even if  a  procedural  aberration  or  error  in
assessment or prejudice to a tenderer, is made out. The  power  of  judicial
review will not be permitted to be invoked to protect  private  interest  at
the cost  of  public  interest,  or  to  decide  contractual  disputes.  The
tenderer or contractor with a grievance can always seek damages in  a  civil
court.  Attempts  by  unsuccessful  tenderers  with  imaginary   grievances,
wounded pride and business rivalry, to make mountains out  of  molehills  of
some technical/procedural violation or some prejudice to self, and  persuade
courts to interfere by  exercising  power  of  judicial  review,  should  be
resisted. Such interferences, either interim or final, may  hold  up  public
works for years, or delay relief and succour to thousands and  millions  and
may  increase  the  project  cost  manifold.  Therefore,  a   court   before
interfering in tender  or  contractual  matters  in  exercise  of  power  of
judicial review, should pose to itself the following questions:
(i) Whether the process adopted or decision made by the  authority  is  mala
fide or intended to favour someone;
Whether the process adopted or decision made is so arbitrary and  irrational
that the court can say: ‘the decision is such that no responsible  authority
acting reasonably and in accordance with relevant law could have reached’;
(ii) Whether public interest is affected.

If the answers are in the negative, there should be  no  interference  under
Article  226.  Cases  involving  blacklisting   or   imposition   of   penal
consequences on a tenderer/ contractor or  distribution  of  State  largesse
(allotment of sites/shops, grant of licences,  dealerships  and  franchises)
stand on a different  footing  as  they  may  require  a  higher  degree  of
fairness in action.”[Para 21]

21.   We have seen that the present tender has not  gotten  off  the  ground
since May 2015, and  one  year’s  precious  time  has  been  wasted  due  to
litigation between the parties.  We must hasten to add that  the  Government
of Gujarat is partly to blame for this inasmuch as it arrived at  a  minimum
wage figure and did not disclose the same to the  tendering  parties  twice.
Even in the second round of litigation, the Government did not disclose  the
newly arrived at minimum wage figure of Rs.2,91,00,000/- to the two  persons
in the fray before us.  Ordinarily,  therefore,  we  would  have  asked  the
Government to disclose the second figure of minimum  wage  and  restart  the
tendering process.  However, we do not think that the justice  of  the  case
requires us to do so, for two reasons.  First and foremost, Respondent  No.1
before us has clearly violated the strict terms of the tender  condition  on
every occasion and hence cannot be given relief.  And, secondly, we  already
find that due to litigation the present tender has not taken  off  for  over
one year.  In the absence of malafides, and indeed the High  Court  judgment
has found that malafides did not vitiate the calculation of minimum wage  by
the Labour Department, we cannot accept Shri  Divan’s  submission  that  the
figure of Rs.2,91,00,000/- was tailor made to suit the bid  offered  by  the
Appellant herein.  We, therefore, set aside  the  decision  of  the  Gujarat
High Court and allow the Government to proceed  further  in  finalizing  the
tender in favour of  the  Appellant  herein.  The  appeal  is,  accordingly,
allowed with no order as to costs.


                                        (Dipak Misra)


New Delhi;                              (R.F. Nariman)

July 26, 2016

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