Quashed

M/S.Executive Security Service Pvt.Ltd. v. Superintendent,Svp Post Graduate Institute of PEDIATRICS,CUTTACK-2

Orissa HC3 Mar 2017WP(C)/17388/2016

Case brief

AI extract

What is this about?

The High Court of Orissa quashed an order awarding a security services tender because both the petitioner and the successful bidder were ineligible; the petitioner due to a pending criminal case and the other due to overwriting in its bid.

What did the court decide?

The order dated 19.09.2016 requesting withdrawal of petitioner and award of contract to opposite party no.2 is quashed; opposite party no.1 directed to proceed with fresh tender.

M/S.Executive Security Service Pvt.Ltd. Vs… — Company and Corporate | Orissa HC (2017)

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HIGH COURT OF ORISSA : CUTTACK

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W.P.(C) NO. 17388 OF 2016

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In the matter of an application under Articles 226 and 227 of the Constitution of India.

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AFR

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----------M/s Executive Security .....… Petitioner Services Pvt. Ltd. -VersusSuperintendent, SVP Post Graduate Institute of Pediatrics, Cuttack and another. ......... Opp. Parties

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For petitioner : M/s. Aditya Mishra, S. Pradhan, and A.Mishra, Advocates. For opp. parties : Mr. B.P. Pradhan, Addl. Govt. Advocate. (O.P. No.1) M/s. Sumit Lal, R.K. Satpathy, S.K. Kanungo, A.K. Jethy, and N.K. Sahoo, Advocates. (O.P. No.2) ---------------

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PRESENT

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THE HON’BLE THE CHIEF JUSTICE MR. VINEET SARAN AND

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THE HON’BLE DR. JUSTICE B.R. SARANGI

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Date of hearing : 22.02.2017 :: Date of Judgment: 03.03.2017

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DR. B.R. SARANGI, J. The Superintendent, Sardar Vallavbhai Patel

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Post Graduate Institute of Pediatrics (SVPPGIP), Health and

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Family Welfare Department, Cuttack-opposite party no.1 published tender notice no.2654 (Annexure-1) inviting sealed tenders under two bid system from reputed and experienced service providers for supply of manpower for cleaning and sanitation of the hospital, as well as for security services for round the clock services for a period of one year. Each tender was to contain both technical and financial bids separately. The technical bids were to be opened first and financial bids were to be opened of those bidders, who qualified in technical bids. The details of information for outsourcing the service of cleaning, sanitation work and security services was given in the tender documents separately, which was to be downloaded from the website or purchased from the office on paying cash of Rs.1000/- non-refundable for each tender papers on all working days from 11 AM to 4 PM within the stipulated period.

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The petitioner M/s Executive Security Services Pvt.

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Ltd. is a company registered under the Companies Act. It has been providing security services to different government, as well as private organizations across the State, and possessed proper registration and licenses for doing such work. As such, it was the successful bidder for the previous year in respect of opposite party no.1. The petitioner and opposite party no.2 submitted their bids to provide services of security guards before the last

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date and time for submission of tender, i.e., 09.08.2016 up to 4.30 PM. As per the tender document, the technical bids were to be opened on 10.08.2016 at 3.30 PM in the office chamber of opposite party no.1, and the bidders who would be successful in the technical bid, were to be allowed to participate in the financial bid to be opened on 11.08.2016 at 3.30 PM. Both petitioner and opposite party no.2, having become successful in technical bid, their financial bids were opened on the date fixed by the competent authority and opposite party no.2, being the lowest bidder, was declared successful.

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An objection was raised by the petitioner that performance of opposite party no.2, in providing cleaning and sanitation services to Capital Hospital, Bhubaneswar, was not satisfactory, and it had earned a bad reputation. In addition to the same, the bid submitted by opposite party no.2 violated the circular issued by the Government of India on service tax component, labour component and other ancillary things, and without verifying the same in proper perspective as because the opposite party no.2 had quoted lowest price, the declaration of it for the work in question cannot sustain. Hence, the petitioner has approached this Court by filing the present writ petition to quash the office order dated 19.09.2016, by which the petitioner has been requested to withdraw the security services manpower

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with effect from 16.10.2016 forenoon and allow opposite party no.2 to provide security services manpower to the institution from that date for smooth management of the hospital, and opposite party no.2 has been directed to submit the agreement before 15.10.2016.

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Sri Aditya Mishra, learned counsel for the petitioner strenuously contended that consideration of the tender submitted by opposite party no.2 was in gross violation of the provisions contained in the tender document, inasmuch it violated the circular issued by Government of India on service tax component, labour component and, more particularly, the statutory deposits, which were to be paid in shape of E.S.I. and E.P.F. of the security persons. As such, the price quoted was violative of minimum wages notifications of the government issued from time to time. Above all, the performance of opposite party no.2 was not satisfactory as it was carrying on the cleaning and sanitation service of the Capital Hospital, Bhubaneswar. He further contended that opposite party no.2 was otherwise also ineligible due to overwriting in financial bid, which is violative of clause-12 of the General Instructions of the tender documents. Therefore, the office order dated 19.09.2016 is liable to be quashed.

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Mr. B.P. Pradhan, learned Addl. Govt. Advocate, by

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referring to the counter affidavit filed on behalf of opposite party no.1, tried to justify the action taken in selecting opposite party no.2. He contended that the petitioner had been providing security services to SVPPGIP Institute from 2011, pursuant to DMET order dated 25.04.2011 and office order dated 17.06.2011 for a period of three years. After expiry of the contract period of three years, the petitioner was allowed to continue by way of an interim arrangement vide order dated 05.09.2014 till finalization of the tender process. As such, there was no agreement executed between the parties after 2014. As the selection of opposite party no.2 has been done in consonance with the terms and conditions of the tender call notice and also as per law and guidelines applicable from time to time, the contention raised that there was violation of such law and guidelines is not tenable. It is further contended that pursuant to tender call notice, six bidders had submitted their respective bids for security services. The technical bids of six bidders including the petitioner were opened on 10.08.2016 at 3.00 PM by the Tender Committee consisting of six members in presence of bidders/authorized agents of the concerned firms. In the technical bid process, four bidders were technically qualified for opening of the financial bids. On 11.08.2016, the

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financial bids were opened in presence of bidders/authorized agents and after opening of financial bids for security services, the tender committee examined the financial bids of four technically qualified bidders. As it was found that M/s Reliable Services and Intelligence Pvt. Ltd. had not filled up the I.T. column, which was mandatory for every outsourcing agencies as per Section 194-C of the Income Tax Act, 1961, its financial bid was cancelled by the Tender Committee. According to the Finance Department of the Government of Odisha, the service charges quoted in the range of one paisa to rupees seven are considered to be unreasonably low to carry out any service providing work. Therefore, the Tender Committee, on verification of the remaining financial bids, found that the bid of the petitioner was not acceptable, rather the bid of opposite party no.2, which fulfilled the criteria and was also lowest one, was acceptable and, accordingly, recommended the name of opposite party no.2 to award the contract for providing security services to the institution for a period of one year. It is further submitted that the contention raised, that opposite party no.2 had not quoted the correct service tax component in its price bid, was not correct. Further, as per Rules 22 and 23 of the Odisha Minimum Wages Rules, 1954 read with Form-IXA thereof, the maximum days a person can be engaged to work is 26 days in a

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month with minimum daily wages and other benefits like EPF, ESI etc. and, as such, there shall be one day off in a week. If there are four Sundays in a month, then an employee can work for a maximum period of 26 days only. Therefore, the calculation of all price/tax components by taking into consideration 26 working days is fully justified and is in accordance with the provisions of Rules 22 and 23 of Odisha Minimum Wages Rules, 1954, as well as Form-IXA thereof. To substantiate his contention, he has relied upon the judgments of the apex Court in the cases of Digvijay Woollen Mills Ltd. V. Mahendra Pratap Buch, 1980-II L.L.J. and Jeewanlal (1929) Ltd. etc. etc. v. Appellate Authority, Payment of Gratuity

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Act and others etc. etc., 1984-II L.L.J.

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Mr. S. Lal, learned counsel appearing for opposite party no.2 submitted that the petitioner was ineligble to participate in the tender process, as a criminal case is pending against it. So far as the compliance of the statutory provisions, as mentioned in tender call notice, is concerned, it is stated that there was no violation and, as such, he has adopted the arguments advanced by learned Addl. Govt. Advocate.

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We have heard learned counsel for the parties and perused the records. Since pleadings have been exchanged

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between the parties, the matter is disposed of finally at the stage of admission.

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Some of the clauses of the tender document for outsourcing of security service provider for SVPPG Institution of Pediatrics, Cuttack, which are relevant for effective adjudication of the case, are extracted below:

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“ General Instructions for bidders .

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Scope of the work

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xx xx xx

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2. The security personnel shall be deployed round the clock in 3 shifts at different places of the premises as will be required.

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xx xx xx

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General instructions xx xx xx

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10(k) An affidavit to the effect that no criminal case is pending with the police against the Proprietor/Firm/Partner or the Company (Service Provider) and the Service Provider has not been blacklisted anywhere.

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Xx xx xx

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12. All entries in the tender form should be legible and filled clearly. If the space for furnishing information is insufficient, a separate sheet duly signed by the authorized signatory may be attached. Amounts quoted in figure should be repeated in words and in case of any discrepancy the amounts stated in words shall prevail. No overwriting or cutting is permitted in the Financial Bid Form. In such cases, the tender shall be summarily rejected. However, the cuttings, if any, in the Technical Bid Application must be initiated by the person authorized to sign the tender bids.”

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xx xx xx

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15. The quoted rates shall not be less than the minimum wages as fixed/notified by the Government of Odisha from time to time and shall include all statutory obligations. The service provider shall be liable for all kinds of dues payable in respect of the personnel provided under the contract and the Authority shall not be liable for any dues for availing the

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services of the personnel. The Performance Security Deposit will not be released until the service provider produces proof of up to date payment of Service Tax, EPF & ESI contribution of the personnel so engaged.

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xx xx xx

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Application - Financial Bid

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xx xx xx

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2. Rate per person per month inclusive of all statutory liabilities, tax, levies, cess etc.

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xx xx xx

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Notes:-1 The Remuneration of manpower not to be less than the minimum wages fixed by the Govt. of Odisha, Labour & Employees State Insurance Department.

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2. The total rates quoted by the tendering Service Provider should be inclusive of all statutory/taxation liabilities in force at the time of entering into the contract. The Authority will have no liability in relation to any statutory or other dues.

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3. The payment shall be made on conclusion of the calendar month only on the basis of no. of working days for which duty has been performed by each person as certified by the Authority.

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Terms & Conditions General

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xx xx xx

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10. It will be the responsibility of the Service Provider to pay to the person deployed a sum not less than the minimum rate prescribed the Government to their respective account, and adduce such evidence to the Superintendent, SVPPGIP., Cuttack, every month prior to payment towards remuneration of the personnel. Payment of remuneration of any kind other than the above procedure is not acceptable at any cost.

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xx xx xx

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19. The Service Provider shall provides reasonably good uniform with name badges to its personnel deployed at check gate at its own cost and ensure that they are used by the personnel deployed and are maintained in good condition. The uniform, accessories such as, belt shoes, socks, caps torch with cell, cane stick etc. shall be borne/supplied by the Service Provider at its cost. The clothes worn by the security guards while on active duty shall be such that it would not hamper in his efficient performance. In particular, it will neither be too tight nor too loose so as to obstruct movement or bending of

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limbs. Every private security guard will carry a notebook and a writing instrument with him. Every private security guard, while on active security duty, will wear and display the Photo identity card issued on the outer most garment above waist level in a conspicuous manner to be signed by the Authority and the Service Provider.

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xx	xx	xx
*Legal*
xx	xx	xx

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27. The Service Provider shall also be liable depositing all taxes, levies, Cess etc. on account of service rendered by it to the Department of office concerned to the concerned tax collection authorities, from time to time, as per the rules and regulations in the matter. Attested Xerox copies of such documents shall be furnished to the Department or office concerned. xx xx xx Financial xx xx xx

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40. The agency shall be solely responsible for compliance to the provisions of various labour and industrial laws, such as, wages allowances, compensations, EPF, Bonus, Gratuity ESI etc. relating to personnel deployed by it or for any accident caused to them and the Superintendent, SVPPGIP, Cuttack shall not be liable to bear any expense in this regard. The Agency shall make payment of wages of a month to security personnel engaged by it by first working day of the succeeding month irrespective of any delay in settlement of its bill by the Superintendent, SVPPGIP, Cuttack for whatever reason. The Agency shall also be responsible for the insurance of its personnel. The security agency shall specifically ensure compliance of various Laws/Acts, including but not limited to the following and their re-enactments/amendments modifications:I) The payment of Wages Act 1936 II) The Employees Provident Fund Act, 1952. III) The Contract Labour (Regulation) Act, 1970 IV) The Payment of Bonus Act, 1965 V) The Payment of Gratuity Act, 1972 VI) The Employees State Insurance Act, 1948 VII) The Employment of Children Act, 1938 VIII) Minimum Wages Act, 1948 IX) Private Security Agencies (Regulation) Act, 2005

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xx xx xx”

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Clause-15 of the General Instructions for Bidders,

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which has been quoted above, stipulates that the quoted rates shall not be less than the minimum wages as fixed/notified by the Government of Odisha from time to time and shall include all statutory obligations. So far as minimum wages per month is concerned, the same has to be calculated by multiplying the minimum wages by 26 days and not by 30 days, as the rate of wages includes one day of weekly off. No person shall be engaged for more than 6 days in a week and for every extra day of work, he/she shall be entitled for double his/her wages. Therefore, arrangement should be made in such a manner that every guard gets a weekly off, another reliever, who does not have an off day on that, is engaged in his place. So in actual, for those four days in the month considered to be weekly off, one person is entitled for a paid off, while another person is discharging duty instead of him. Thus, in actual there is double payment for those four days and after adjustment of four wages against off, there are remaining four wages, which ultimately takes the count to 30 days, and the wages quoted below 30 days cannot be accepted as valid. In the event of the establishment of the opposite party no.1 remaining closed on Sundays, the proper calculation would have been 26 days as suggested, but not otherwise.

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Clause-2 of the General Instructions for Bidders, under the heading “Scope of the work”, clearly stipulates that security personnel shall be deployed round the clock in three shifts at different places of the premises as will be required. Under the heading “Application-Financial Bid”, in clause-2 it has been specifically stated rate per person per month inclusive of all statutory liabilities, taxes, levies, cess etc. are to be paid. Thereby, the total rates quoted by the tendering service provider should be inclusive of all statutory/taxation liabilities in force at the time of entering into the contract as the authority will have no liability in relation to any statutory or other dues.

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Reliance has been placed by learned Addl. Government Advocate on the judgment rendered in Digvijay Woollen Mills Ltd. (supra), wherein the apex Court, while considering the provisions contained under Section 4(2) of the Payment of Gratuity Act, 1972, in paragraph-5 thereof observed as follows:

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“The view expressed in the extract quoted above appears to be legitimate and reasonable. Ordinarily, of course, a month is understood to mean 30 days, but the manner of calculating gratuity payable under the Act to the employees the work for 26 days a month followed by the Gujarat High Court cannot be called perverse. It is not necessary to consider whether another view is possible. The High Court summarily dismissed the petition of the appellant in both the appeals before us and upheld the decision of the authorities under the Act.”

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In paragraph-6 of the said judgment, it has been clarified that, the decisions based on some provisions of the Minimum Wages Act and other statutes, which were relied on by either side, are not relevant on the question of computation of fifteen days’ wages under Section 4(2) of the Payment of Gratuity Act. Similar view has also been taken by the apex Court in Jeewanlal (1929) Ltd. (supra), more particularly the ratio decided in Shri Digvijay Woollen Mills Ltd. (supra) has been referred to in paragraph 11 of the said judgment.

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This Court is not disputing the position, as discussed above by the apex Court, so far as applicability of Payment of Gratuity Act is concerned. But, the question raised in the present case is with regard to the minimum wages to be paid by the service provider to its employees, which is completely different from that of the judgment referred to above. In any case, if the minimum wages provided by the service provider to its employees is less than the amount fixed by the competent authority, then certainly the bids submitted by the parties could not have been taken into consideration by the authority concerned. But, instead of delving into such issue, objection has been raised by opposite party no.2 that the petitioner is not eligible for participating in the bid, in view of

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the provisions contained in Clause-10(k) of the General Instructions of the tender documents, which specifically states that an affidavit to the effect that, no criminal case is pending with the police against the proprietor/firm/partner, or the Company (Service Provider) and the Service Provider has not been blacklisted anywhere. The opposite party no.2, in its counter affidavit, in paragraph 17, has categorically stated that the petitioner, which had been discharging the duties and job in different establishments and sectors of Odisha, has misappropriated, cheated and manipulated the EPF and ESI amounts of the poor labouers at ITPS, Banaharpali of the District of Jharsuguda, for which a criminal proceeding bearing GR Case No. 1678/2009 arising out of Banaharpali P.S. Case No. 84 of 2009 has been initiated against the Managing Director of the petitioner company.

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Apart from the same, the EPF organization has also declared the petitioner company as defaulter of making payment of EPF amount to its employees, while issuing the defaulting establishment list in the month of March 2015, and it has been clearly indicated at Sl. 81 of the said list that the petitioner agency was a defaulter in making payment of the EPF dues. In view of the provisions contained in Clause 10(k), the petitioner has filed an affidavit stating that no criminal case is pending

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against the proprietor/firm/partner of the company, but in reality, a criminal case is pending, which amounts to filing of false affidavit. Consequentially, the petitioner is ineligible to participate in the bid. Though a rejoinder affidavit has been filed by the petitioner to the counter affidavit filed by opposite parties no. 1 and 2 on 09.11.2016, no specific reply has been given to the contention raised with regard to pendency of the criminal case against one of the Managing Directors of the petitionercompany, as stated in paragraphs 17 and 18 of the counter affidavit filed by opposite party no.2. In view of such, it is admitted that a criminal case is pending against one of the Managing Directors of the petitioner-company itself and on query, being made by this Court, Mr. A. Mishra, learned counsel for the petitioner also candidly stated that against one of the Managing Directors of the petitioner-company a criminal case is pending for adjudication, but he has not been convicted.

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Mr. A. Mishra, learned counsel for the petitioner stated that opposite party no.2 incurs disqualification, in view of Clause-12 of General Instructions of the tender documents, which specifically states that no overwriting or cutting is permitted in the financial bid form, and in such cases the tender shall be summarily rejected. It is stated that financial bid form of opposite party no.2 was not made available to the

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petitioner at the time of filing of the writ petition. But, in the counter affidavit filed by opposite party no.2, said application of financial bid submitted by opposite party no.2 has been filed vide Annexure-B/2 dated 04.08.2016. On perusal of the same, it is clear that there is overwriting and cutting in the said application form so far as figures are concerned. Consequentially, the financial bid submitted by opposite party no.2 should have been rejected in view of Clause-12 of the General Instructions of tender documents. In the rejoinder affidavit filed by the petitioner in paragraph 7(v), in reply to the counter affidavit filed opposite party no.2, it has been clearly stated that it is evident from Annexure-B/2 that the figures have been overwritten and there is cutting, which is not permitted in the financial bid as per Clause-12 of General Instructions of the tender documents in Annexure-2 and the said tender was to be summarily rejected.

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In the facts and circumstances, as discussed above, the petitioner’s tender could not have been considered in view of the provisions contained in Clause-10(k) of the General Instructions of the tender document in Annexure-2. Similarly, the tender of opposite party no.2 also could not have been considered as there was overwriting and cutting in financial bid application form. Consequentially, since both petitioner and

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opposite party no.2 are found to be ineligible to participate in the tender process itself, this Court is of the considered view that the office order dated 19.09.2016 passed by opposite party no.1 in Annexure-7, requesting the petitioner to withdraw the Security Service manpower with effect from 16.10.2016 and allowing opposite party no.2 to provide Security Service manpower with effect from 16.10.2016 by executing the agreement before 15.10.2016, cannot sustain in the eye of law, and accordingly, the same is hereby quashed. However, quashing of order dated 19.09.2016 in Annexure-7 will not preclude opposite party no.1 from proceeding with fresh tender, in accordance with law, as expeditiously as possible.

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The writ petition is disposed of with the aforesaid observation and direction. No order as to cost.

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.…….......……………… ( VINEET SARAN ) CHIEF JUSTICE

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…………………..……….. ( DR. B.R. SARANGI ) JUDGE

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The High Court of Orissa, Cuttack Dated the 3^rd March, 2017/Ashok/Ajaya/GDS

M/S.Executive Security Service Pvt.Ltd. v. Superintendent,Svp Post Graduate Institute of PEDIATRICS,CUTTACK-2

Case brief

What is this about?

What did the court decide?

M/S.Executive Security Service Pvt.Ltd. v. Superintendent,Svp Post Graduate Institute of PEDIATRICS,CUTTACK-2

Case brief

What is this about?

What did the court decide?

What the court decided

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Issues for consideration

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