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HIGH COURT OF DELHI
W.P.(C) 12682/2018
COLONEL ANAND SAGAR SAHGAL (RETD.)
AND ANR. ..... Petitioners
Through: Mr S. Venkatesh, Ms Nishtha Kumar, Mr Samarth Kashyap, Mr Somesh Srivastava and Mr
Vikas Maini, Advocates.
OF INDIA AND ANR. ..... Respondents
Through: Mr Anurag Ahluwalia, CGSC for UOI with Col. Prashant, DGR.
Mr Sandeep Mahapatra, Advocate for R-2.
VIBHU BAKHRU, J
JUDGMENT
1. The petitioners have filed the present petition impugning an order dated 15.11.2018 (hereafter „the impugned order‟) passed by respondent no.1 (Directorate General Resettlement – DGR) disempanelling petitioner no.1 from the DGR Scheme for violating „the Guidelines for functioning of DGR Empanelled Ex-Servicemen for security services‟ (hereafter „the DGR Guidelines‟). 2019:DHC:1530
2. Petitioner no.1 is a former member of the Indian Army (Exserviceman – ESM) and he carries on the business of providing security services under the name and style of petitioner no. 2. The petitioner is registered with DGR for providing security services to Public Sector Undertakings (PSUs).
3. The DGR had dis-empanelled the petitioner on the ground that the petitioner had quoted service charge less than 14% of the wage structure for providing security services to respondent no.2, GAIL (India) Ltd – hereafter „GAIL‟, which was inconsistent to the DGR Guidelines.
4. The petitioner has challenged the impugned order on the ground that the violations alleged by DGR are inconsistent with the tender dated 17.08.2018 (hereafter „the tender document‟) issued by the GAIL. The said document states that all agencies quoting service charges above 14% would be rejected and the bidders were required to quote service charges “not more than 14%”. It is further contended by the petitioner that the impugned order is based on the provisions of old DGR Instructions (Instructions for Functioning of DGR Empanelled Ex-Servicemen Security Staff and Fire Protection Management Agencies, 2006), which are not applicable in the petitioners‟ case. Factual Background
5. In the year 2012, the Ministry of Defence issued an office memorandum dated 09.07.2012 notifying the Guidelines for functioning of DGR Empanelled Ex-Servicemen for security services (DGR Guidelines). The said Guidelines were further amended on 16.01.2013.
6. On 03.11.2016, petitioner no.2 agency was empanelled as a Security Agency with the Department of Ex-Servicemen, Ministry of Defence.
7. On 17.08.2018, DGR issued a notice inviting tenders (NIT) for providing Security, Caretaking and Loss prevention services alongwith Pipeline Network/Township/Installation at GAIL, Jublee Tower/Infohub and GAIL Vihar, Noida. In terms of the said Tender documents, the agency quoting the lowest service charge would be considered as L[1] bidders and accordingly the tender would be awarded to such agency. It was further provided therein that bids quoting service charge higher than 14% would be rejected.
8. The petitioner submitted the bid pursuant to the aforesaid NIT. On 24.08.2018, the bids were opened and the petitioner emerged as the L[1] bidder, having quoted the service charge rate at 13.5%.
9. Thereafter, the petitioner received a fax of acceptance (FoA) dated 31.08.2018 sent by the GAIL accepting the petitioner‟s bid for providing security service for a period of two years for service charge at the rate of 13.5% of the wage structure. Pursuant to the aforesaid FoA, the petitioner and the GAIL entered into a contract dated 07.09.2018.
10. In the meanwhile, the DGR received a letter from one Lt. Col. Uma Shankar (proprietor of an agency named as M/s Uma Shankar Security Agency), inter alia, stating that the service charge quoted by the petitioner in the bidding process was lower than 14% and the same is in violation of the DGR Guidelines.
11. Consequently, a show cause notice dated 27.08.2018 (which is also impugned in the present petition) was issued to the petitioner calling upon him to show cause as to why the petitioner be not disempanelled for violating the provisions of the DGR Guidelines.
12. Being aggrieved by the show cause notice dated 27.08.2018, the petitioners filed a writ petition before this Court (being W.P.(C) 9996/2018). The said petition was disposed of by an order dated 24.09.2018, directing the petitioner to respond to the impugned show cause notice and further directing the DGR to consider the aforesaid response and pass a speaking order. The Court also observed that if there is any ambiguity in the DGR Guidelines, the same would have to be read in favour of the petitioner.
13. Pursuant to the aforesaid order, the petitioner replied to the show cause notice by way of a letter dated 26.09.2018, inter alia, stating that the bid submitted by the petitioners was in accordance of both the Tender document issued by GAIL as well as the DGR Guidelines.
14. Consequent to the aforesaid reply, the petitioner was granted a hearing on 22.10.2018 by the DGR. Thereafter, the DGR passed the impugned order dis-empanelling the petitioners from the DGR Scheme.
15. According to the DGR, the petitioner has violated his undertaking submitted on 17.01.2018, wherein the petitioner had undertaken that under no circumstances, he would charge service charges below 14%. It is also alleged that the same contravenes paragraph 16(a) of the DGR Guidelines (Office Memorandum dated 09.07.2012). The said Clause is set out below:- “16. Wages (a) Wages: All employees engaged by DGR sponsored ESM for security work at CPSUs will be paid monthly wages in accordance with minimum wages notified by Ministry of Labour & Employment, GOI for employment of personnel for watch and ward duties for various regions of the country. All statutory deposits and deductions will be governed by the same. The ESM Security Agency will be paid service charges @ 14% Wage structure is attached at Annexure V. Wages of supervisors will be @ 1.33 times of unarmed guards.”
16. The aforesaid contention is contrary to the tender conditions as stated in the notice inviting tender (NIT) dated 17.08.2018 issued by GAIL. In terms of the said NIT, all bidders were required to quote their service charges not exceeding 14%. The NIT also indicated that the successful bidders would be selected on the basis of service charges quoted by the bidders.
17. In view of the above, it is apparent that there was a clear conflict between the conditions imposed by the DGR and GAIL. The petitioner sought to reconcile the said conflict by proceeding on the basis that the undertaking given by him to the DGR would be subject to the conditions of the bidding process. The petitioner also relied upon the Office Memorandum dated 13.09.2018 issued by the Department of Public Enterprises, which expressly states that the service charges chargeable by security agency would be negotiable between the CPSE and the agency concerned. The relevant clause is set out below:- “(iv) The service charges chargeable by security agency will be negotiable between the CPS and the agency concerned subject to guidelines issued vide MoD OM No.28(3)/2012-D (Res-1) dated 09.07.2012 and amendments made therein from time to time.”
18. In view of the conflict between the condition imposed by the DGR and the competitive bidding process adopted by GAIL, this Court passed an order directing that a meeting be convened between three stakeholders, namely, the DGR, the Department of Public Enterprises, Ministry of Industries & Heavy Enterprises & Public Enterprises and GAIL to resolve the aforesaid issue.
19. Mr Anurag Ahluwalia and Mr Mahapatra, learned counsel appearing for respondent no.1 (DGR) and respondent no.2 (GAIL) respectively, state that the issue whether the service provider could offer a mark up of service charges lower than the 14% has now been resolved. They state that in terms of the order dated 29.11.2018, a meeting between the representatives of DGR and GAIL was convened by the Secretary, Department of Public Enterprises, Ministry of Industries and Heavy Industries & Public Industries, Government of India dated 07.02.2019. The relevant extract of the minutes of the said meeting is set out below:- “2. After detailed discussion it emerged: i) The existing guidelines dated 13.09.2018 of DPE on appointment of security personnel in CPSEs stipulate that CPSEs are required to source a panel of Ex- Servicemen Security Service providers from DGR instead of going for any open tender in this regard. ii) In order to enable the CPSEs to have a choice of suitable agency to meet their specific requirement, DGR is required to send the name of more than one Security Agency to CPSEs. iii) DPE guidelines [para 2(iv)] dated 13.09.2018 regarding negotiation of service charges by CPSEs is subject to the guidelines dated 09.07.2012 of DGR (which in turn stipulate a fixed figure of 14% service charges). Calling of tender followed by the negotiation by GAIL for below 14% service charges by an agency on the panel of DGR should not have been held as the same is not as per DPE guidelines on the subject.”
20. It is stated that thereafter on 14.02.2019, an office memorandum has also been issued by the Government of India. The same is set out below:- “OFFICE MEMORANDUM Subject:- Appointment of Security Personnel in Central Public Sector Enterprises (CPSEs) from Ex-servicemen Security Agencies sponsored by the Directorate General of Resettlement (DGR). The undersigned to refer to DPE OM of even no. dated 13-09- 2018 on the above mentioned subject and to say that as per Para 2(iv) of the said OM, the service charges subject to guidelines issued vide MoD OM NO. 28(3)/2012-D (Res-1) dated 09.07.2012 and amendments made therein from time to time.
2. In this regard, it is clarified that in no case, service charges may be negotiated by CPSEs below the rate prescribed by DGR in its guidelines for empanelment of ESM Security Service Agencies from time to time (which is 14% at present).
3. All administrative Ministries / Departments are requested to kindly issue necessary instructions to the CPSEs accordingly. S/d (Rajesh Puri) Deputy Director ”
21. In view of the above, the controversy whether an ESM can offer to provide services at a service charge below 14% of the wage structure, does not survive.
22. In so far as the punitive measure against the petitioner is concerned, it is apparent that there was significant confusion as to how bids had to be submitted. Dis-empanelling the petitioner is a punitive measure and, clearly, the same would not be warranted where there is lack of clarity as to the correct course of conduct to be followed in the bidding process.
23. In view of the above, this Court is of the view that a punitive measure against the petitioner for offering service charges below 14% would not be sustainable as at the material time, there was no clarity with GAIL in this regard.
24. The impugned order is, accordingly, set aside.
25. The petition and the pending application are disposed of.
VIBHU BAKHRU, J MARCH 13, 2019 RK