Delhi High Court
Security And Intelligence ... vs Union Of India And Ors. on 14 September, 2022
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision: 14th SEPTEMBER, 2022
IN THE MATTER OF:
+ W.P.(C) 3982/2019 & CM APPL. 32915/2019
SECURITY AND INTELLIGENCE SERVICES (INDIA) LTD.
AND ORS. ..... Petitioners
Through: Mr. Darpan Wadhwa, Senior
Advocate along with Mr. Anupam
Sinha and Mr. Amrit Singh,
Advocates
versus
UNION OF INDIA AND ORS. ..... Respondents
Through: Mr. Chetan Sharma, ASG with Ms.
Bharathi Raju, Sr. Panel Counsel with
Mr. Amit Gupta, Mr. Rishav Dubey,
Mr. Sohag Garg and Mr. Saurabh
Tripathi, Advocates for UOI.
Mr. Sandeep Mahapatra, Standing
Counsel for R-4/GAIL.
CORAM:
HON'BLE THE CHIEF JUSTICE
HON'BLE MR. JUSTICE SUBRAMONIUM PRASAD
JUDGMENT
SUBRAMONIUM PRASAD, J
1. The instant Writ Petition has been filed under Article 226 of the
Constitution of India, seeking issuance of a writ of mandamus or any other
appropriate writ to set aside/quash the Office Memorandum dated
13.09.2018 ("Impugned O.M.") issued by the Union of India/Department of
Signature Not Verified
Digitally Signed
Signing Date:16.09.2022
11:00:01
Public Enterprises, Ministry of Industries and Heavy Industries & Public
Enterprises ("Respondent No. 1") and the tender dated 07.03.2019
("Impugned Tender I"), tender dated 29.03.2019 for Haryana Region I
("Impugned Tender II"), tender dated 29.03.2019 for Haryana Region II
("Impugned Tender III") and tender for Punjab Region ("Impugned Tender
IV") (hereinafter collectively referred to as "Impugned Tenders") by GAIL
(India) Limited ("Respondent No. 4").The Petitioner No. 1 is a private
security agency established in 1974 and is licensed under the Private
Security Agencies (Regulation) Act, 2005 ("PSARA"). Petitioner Nos. 2 to
7 are Ex-Servicemen who are employed with Petitioner No. 1 after their
service in the Indian Armed Forces.
2. The relevant facts leading to the filing of the instant Writ Petition are
as follows: -
i. On 19.05.1992 the Directorate General of Resettlement ("DGR" or
"Respondent No. 5") which functions under the Department of Ex-
Servicemen Welfare (Ministry of Defence) issued guidelines titled
"Guidelines for Sponsoring & Creating of Security Agencies &
Related Activities" which laid down general norms for sponsoring
security agencies for award of security contracts and the modus
operandi of their functioning.
ii. Thereafter, the Ministry of Defence issued an Office Memorandum
dated 04.02.1994 addressed to the Secretaries of all Ministries and
Departments of Government of India, stating that Respondent No.
5 has evolved a scheme to maintain a panel of retired Service
officers, State Ex-Servicemen Corporation and Ex-Servicemen Co-
operative Societies who are desirous of obtaining security work on
contract basis.
Signature Not Verified
Digitally Signed
Signing Date:16.09.2022
11:00:01
iii. Subsequently, on 11.11.1994, Respondent No. 1 issued an
Office Memorandum requesting all administrative
Ministries/Departments of the Government of India to issue
instructions to public sector undertakings under their
administrative control to obtain contract security services from
Respondent No. 5 or the State Ex-Servicemen Security
Corporation for sponsoring Ex-Servicemen Security Agencies on
their panel without engaging security agencies on contract through
open tender. Subsequently, Respondent No. 1 on 18.03.1996
issued another O.M. reiterating the request made in the earlier
O.M. dated 11.11.1994.
iv. On 10.12.1997, Respondent No.1, while noting the need for
granting greater operational freedom to the public sector
enterprises and a view to rationalise and simplify the existing set
of guidelines to public sector enterprises, issued an O.M.
cancelling the previous O.M.'s dated 11.11.1994 and 18.03.1996
amongst other guidelines/memoranda.
v. Thereafter on 01.02.1999, Respondent No. 1 issues an O.M.
restoring the earlier cancelled Office Memoranda dated 11.11.1994
and 18.03.1996, modifying them to the extent that the Respondent
No. 5 would sponsor more than one security agency so that Central
Public Sector Enterprises ("CPSEs") concerned would have a
choice in choosing a suitable outfit keeping in view their specific
requirements and the service chargeable by the security agencies
will be negotiable. Subsequently, Respondent No. 1 issued O.M.'s
dated 27.01.2003, 11.02.2005 and 04.10.2005 reiterating its
request made in the restored O.M.'s.
Signature Not Verified
Digitally Signed
Signing Date:16.09.2022
11:00:01
vi. Thereafter on 11.02.2005, Respondent No. 1 issued an O.M.
making Respondent No. 5, the nodal authority to sponsor security
agencies including State Ex-Servicemen Security Corporations to
all Public Sector Undertakings.
vii. On 23.06.2005, PSARA came into force, which is a legislation
enacted with the objective of regulating private security agencies
("PSAs").
viii. The Respondent No. 4, on 30.04.2016, awarded to the Petitioner
No. 1 a composite contract for Pipeline RoU surveillance including
Foot Patrolling and Watch and Ward Services for various
installations under NCR Gas O&M for a period of three years
expiring on 30.04.2019. The selection of Petitioner No. 1 for the
composite contract was done through an open tender process
involving competitive bidding.
ix. Thereafter, the Department of Expenditure, Ministry of Finance,
Government of India published the General Financial Rules, 2017
on 11.02.2017 and a Manual for Procurement of Consultancy and
Other Services, 2017 on 18.04.2017 which dealt with selection
methods for engagement of service providers.
x. On 13.09.2018, Respondent No. 1 issued Impugned O.M.,
directing all administrative Ministries/Departments to issue
instructions to the CPSEs under their administrative control
requiring manpower of security services to obtain a panel of
qualified Ex-Servicemen Security Service Providers only from
Respondent No. 5, without resorting to the open tender process.
The relevant portion of the Impugned O.M. reads as follows:
Signature Not Verified
Digitally Signed
Signing Date:16.09.2022
11:00:01
"2. It is proposed to merge the provisions of the main
guidelines of 1994 and its amendments issued from time to time
into one comprehensive guideline as follows:
(i) In order to prevent exploitation of Ex-servicemen
(ESM) and to effectively implement their
rehabilitation process, the Directorate General of
Resettlement (DGR) has evolved a scheme
whereby retired service officers and State Ex-
servicemen Security Corporations desirous of
obtaining contracts from CPSEs to provide
manpower for security are empaneled. In this
system, DGR provides a panel of qualified Ex-
servicemen Security Agencies and State ESM
Security Corporations functioning under the
directives of Ministry of Defence.
(ii) All administrative Ministries / Departments are
requested to issue necessary instructions to the
CPSEs under their administrative control
requiring manpower for security services, to
obtain a panel of qualified Ex-Servicemen
Security Service Providers only from the
Directorate General of Resettlement (DGR). West
Block - IV, R.K. Puram, New Delhi without
going to open tendering process.
(iii) However, to ensure that CPSEs get more cost
effective and efficient security agencies, DGR will
sponsor more than one security agency so that the
CPSE concerned would have a choice in choosing
a suitable outfit keeping in view their specific
requirements.
(iv) The service charges chargeable by security agency
will be negotiable between the CPSE 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
(v) Ministry of Defence, Department of Ex-Servicemen
Welfare is the nodal Ministry / Dept. for issuance
of comprehensive guidelines on the subject matter.
Signature Not Verified
Digitally Signed
Signing Date:16.09.2022
11:00:01
3. These guidelines supersede all earlier guidelines issued by
DPE in this regard. All administrative Ministries / Departments
are requested to kindly issue necessary instruction to the
CPSEs accordingly." (emphasis supplied)
xi. The Petitioner No. 1 sent a representation on 26.02.2019 to the
Respondent No. 4 calling upon them to not give effect to the
Impugned O.M. as process of selection from panel of names given
by Respondent No. 5 instead of open tender process.
xii. Thereafter on 07.03.2019, Respondent No. 4 issued a tender
bearing E-Tender No. 8000014720 ("Impugned Tender I"),
inviting bids from security agencies which are sponsored by
Respondent No. 5.
xiii. The Respondent No. 4 floated three other tenders, namely,
Tender No. GAIL/NCR/C&P/S96/2K18/HARYANA
(REGION-1) ("Impugned Tender II"), Tender No.
GAIL/NCR/C&P/S97/2K18/ HARYANA (REGION-2)
("Impugned Tender III"), and Tender No.
GAIL/NCR/C&P/S98/2K18-19/PUNJAB ("Impugned Tender
IV"). Impugned Tender II has been issued for hiring of security,
care taking and loss prevention services for natural gas pipeline
and LPG Pipeline in the State of Haryana (Region 1). Impugned
Tender III has been issued for hiring of security, care taking and
loss prevention services for natural gas pipeline and LPG Pipeline
in the State of Haryana (Region 2).Impugned Tender IV has been
issued for hiring of security, care taking and loss prevention
services for natural gas pipeline Chandigarh Zonal Offices in the
State of Punjab.
Signature Not Verified
Digitally Signed
Signing Date:16.09.2022
11:00:01
xiv. On 29.04.2019, the Respondent No. 4 issued a letter extending the
duration of the contract awarded to Petitioner No. 1 till
29.08.2019.
3. It is submitted by Mr. Darpan Wadhwa, Learned Senior Counsel for
the Petitioners, that the Impugned O.M. and Impugned Tenders are violative
of Articles 14 and 19(1)(g) of the Constitution of India, 1950 as they
completely exclude the Petitioners from participating in the process of
selection of security agencies for CPSEs. Further, the Impugned O.M. and
Impugned Tenders by exclusively confining the right of selection to only a
select group of PSAs empanelled with Respondent No. 5, discriminate
against Petitioners without any reasonable or rational basis.
4. Mr. Wadhwa further submits that the Impugned O.M. and Impugned
Tenders are in contravention of the scheme, mandate and intent of the
PSARA. It is contended by the Ld. Counsel for the Petitioners that all PSAs,
after obtaining a license in accordance with the PSARA, are required to be
treated as equals under the law and no discrimination between them is
permissible by public authorities.
5. Further, it is submitted by the Ld. Senior Counsel for the Petitioners
that the Impugned O.M. classifies all licensed PSAs into sub-classes, i.e. (i)
security agencies empanelled with Respondent No. 5 and (ii) security
agencies not empanelled with Respondent No. 5. The Petitioners contend
that such a classification created by the Impugned O.M. is wholly arbitrary,
capricious and unreasonable as it is not based on any real and substantial
distinction bearing a just and reasonable connection to the object sought to
be achieved by the impugned O.M. and is thereby violative of Article 14 of
the Constitution of India, 1950.He places reliance upon the judgment in
Comptroller & Auditor-General v. Kamlesh Vadilal Mehta, (2003) 2 SCC
Signature Not Verified
Digitally Signed
Signing Date:16.09.2022
11:00:01
349, to support this argument. The relevant paragraphs of the judgment read
as under:
"8. It is not disputed that the Chartered Accountants
having qualification are eligible for being considered
for entrustment of audit work for public sector
undertakings or government concerns. Once it is
accepted that these Chartered Accountants are
qualified and eligible for the audit work and are also
eligible for being brought on the panel of audit work for
public sector undertakings and government concerns,
there appears no valid reason why the impugned
advertisement has created a sub-classification from the
general class of eligible Chartered Accountants which
relates to a smaller group of Chartered Accountants
who form partnership concerns only."
6. The Ld. Senior Counsel for the Petitioners further submits that the
Impugned O.M. and Impugned Tenders are manifestly arbitrary as they bear
no direct relation to the ostensible object of welfare of ex-servicemen and
ignores the interest of a significant number of ex-servicemen employed with
the Petitioner No. 1, who depend on the Petitioner No. 1 for their livelihood.
Additionally, the Impugned O.M. and Impugned Tenders do not bear any
reasonable nexus to advancing the commercial interests of the CPSEs either,
as that can only be achieved through either the Least Cost Selection ("LCS")
method or through the Quality and Cost Based Selection ("QCBS") method
but not through Single Source Selection ("SSS") method. Further, it is
submitted that the Impugned O.M. and Impugned Tenders change the
previous policy of open tendering to the present one without any
justification and in an arbitrary manner, thereby violating Article 14 of the
Constitution of India, 1950.
7. The Ld. Senior Counsel for the Petitioners submits that the Impugned
Signature Not Verified
Digitally Signed
Signing Date:16.09.2022
11:00:01
O.M. and Impugned Tenders fails the test regarding the discretion of the
Government in grant of Government largess as laid down in Ramana
Dayaram Shetty v. International Airports Authority, (1979) 3 SCC 489.
8. The Ld. Senior Counsel has further submitted that the Supreme Court
in various decisions has held that contracts by the State and its
instrumentalities must be normally granted through public tender process
from eligible persons as this ensures transparency, provides fair and
equitable treatment of all tenderers and eliminates irregularities,
interferences and corrupt practices by the concerned authorities. He has
placed reliance upon Nova Ads v. Metropolitan Transport Corporation,
(2015) 13 SCC 257,which refers to the Supreme Court's decision in Nagar
Nigam, Meerut v. Al Faheem Meat Exports (P) Ltd. and Ors., (2006) 13
SCC 382, to support this submission.
9. Further, the Ld. Senior Counsel for the Petitioners places reliance
upon the Central Vigilance Commissions ("CVC") Office Order No. 23/7/07
dated 05.07.2017 wherein it is stated that as per circulars issued by the CVC,
an award of contract on nomination basis violates Article 14 of the
Constitution. The Office Order further states that award of contract on
nomination basis can only be done in exceptional circumstances and
adequate justification for the same must be provided.
10. The Ld. Senior Counsel for the Petitioners has also relied upon the
General Financial Rules, 2017 and Manual for Procurement of Consultancy
& Other Services, 2017 which provides that the general norm and consistent
practice in procurement of security contracts is through QCBS or LCS
method and SSS method is only permissible in exceptional circumstances.
11. Mr. Chetan Sharma, Learned Additional Solicitor General for
Respondent Nos. 1 to 3 & 5, submits that earlier, a number of security
Signature Not Verified
Digitally Signed
Signing Date:16.09.2022
11:00:01
agencies employed by various Ministries and Departments of Government
of India would employ ex-servicemen and were exploited by PSAs by not
paying them reasonable wages. In order to prevent such exploitation,
Respondent No. 5has evolved a scheme to maintain a panel of retired
Service officers, State Ex-Servicemen Corporation and Ex-Servicemen Co-
operative Societies who are desirous of obtaining security work on contract
basis. Respondent No. 5 has also ensured that these ex-servicemen are paid
as per the wage formula promulgated by Respondent No. 5 which has been
evolved keeping in view the provisions of the Minimum Wages Act, 1948
and Variable Dearness Allowance promulgated by Ministry of Labour /
State Government as revised from time to time. The Ld. Counsel for the
Respondent relies upon O.M. dated 04.02.1994 issued by the Ministry of
Defence to support this contention.
12. The Ld. ASG submits that the Respondent No. 1 issued O.M. from
time to time requesting the administrative Ministries/Departments of the
Government of India to issue instructions to CPSEs under their
administrative control to obtain security services on a contract basis from
Respondent No. 5 or State Ex-Servicemen Security Corporation for
sponsoring Ex-Servicemen Security Agencies on their panel. The Impugned
O.M. is a consolidation of these guidelines issued in several O.M.'s issued
by Respondent No. 1 since 11.11.1994 which has been done in pursuance of
the policy of the Government of India for the welfare of ex-servicemen as
stated in the O.M. dated 04.02.1994. Further, it is an established principle
that judicial interference is uncalled for in contractual matters in the absence
of irrationality on the face of the record and deference is owed to the
Executive in matters of economic policies.
13. The Ld. ASG submits further that the Impugned O.M. achieves two
Signature Not Verified
Digitally Signed
Signing Date:16.09.2022
11:00:01
important state objectives i.e., firstly, it provides specially trained security
personnel to strategically important national assets held by CPSEs.
Secondly, it makes provisions for resettlement of ex-servicemen by
promoting their right to work which is a constitutionally sanctioned State
goal under Article 41 of the Constitution of India, 1950.
14. It is further submitted by the Ld. ASG that the classification
envisioned under the Impugned O.M. is based on cogent intelligible
differentia which is as follows:
i. Ex-Servicemen are in a class of their own as they receive intensive
and specialised training under the armed forces.
ii. Ex-Servicemen are subject to intense scrutiny throughout their
years of service which requires them to maintain the highest
standards of conduct and their antecedents are scrupulously
verified.
iii. There is a need for specialised security for national assets under
the control of CPSEs as several of them are strategically important
for the State.
15. The Ld. ASG has further submitted that a security agency which
provides employment to ex-servicemen is entitled to approach Respondent
No. 5 for empanelment and ex-servicemen have an option to approach
Respondent No. 5 to register them and allot them to an empanelled service
provider. The Impugned O.M. does not make any distinction among
different classes of security agencies which employ Ex-Servicemen.
16. It is submitted by the Ld. ASG that the objective of PSARA is to
regulate PSAs so that they operate within a legal framework and PSARA
does not aim to classify all PSAs as one class.
17. It is further submitted by the Ld. ASG that the Impugned O.M does
Signature Not Verified
Digitally Signed
Signing Date:16.09.2022
11:00:01
not violate Article 19(1)(g) of the Constitution of India, 1950. It is stated by
him that issuance of licenses under PSARA does not result in any vested
right within the PSAs to be eligible for providing security services to
CPSEs. Further, the Impugned O.M. does not prohibit the proprietor
petitioner to do business with all bodies which are not CPSEs/State PSUs.
18. Mr. Sandeep Mahapatra, Ld. Counsel for Respondent No. 4, has
submitted that Respondent No. 4 is a CPSE and is governed by various
O.M.'s, guidelines and instructions issued from time to time by Respondent
Nos. 1 and 2, in relation to engaging services of security agencies. It is on
the basis of these binding O.M.'s, guidelines and instructions that
Respondent No. 4 issued Impugned Tender I. Further, Impugned Tender I
has been finalised and awarded to successful bidders on 29.06.2019 and so
the relief claimed by the Petitioners qua setting aside Impugned Tender I has
become infructuous.
19. It is further submitted by Mr. Mahapatra that the Impugned Tender II,
Impugned Tender III and Impugned Tender IV floated by Respondent No. 4
and formed part of the composite contract awarded to Petitioner No. 1
earlier have also been issued in compliance with the Impugned O.M. and
guidelines issued by Respondent No. 1. Further, in respect of these tenders,
Fax of Acceptance has been issued to successful parties with their
commencement date being effective from 30.08.2019 i.e., on expiry of the
extended period of existing composite contract awarded to Petitioner No. 1.
The proprietor Petitioner is thus not entitled to any relief as doing so would
severely jeopardise operations of Respondent No. 4 and also compromise
security of pipelines under its control.
20. In rejoinder, it is submitted by Mr. Wadhwa, Ld. Senior Counsel, that
subsequent to the enactment of PSARA, the various O.M.'s issued by
Signature Not Verified
Digitally Signed
Signing Date:16.09.2022
11:00:01
Respondent No. 1 have outlived their utility and purpose. To buttress this
argument, the Learned Senior Counsel has highlighted Section 4 of PSARA
which provides that all PSAs are required to obtain a license to provide
security services. Further, Sections 9(5) and 10(3) of PSARA provides that
PSAs must give preference to ex-servicemen in matters of employment of
private security guards. It is further submitted that Section 13(1)(j) of
PSARA read with its Schedule provides that a private security agency must
comply with all labour legislations, failing which the license of security
agency can be cancelled. It is therefore submitted by the Learned Counsel
for the Petitioner that PSARA mandates that PSAs provide statutory benefits
like bonus, gratuity, provident fund and minimum wages to its employees,
regardless of whether they are empanelled with DGR or not.
21. The Ld. Senior Counsel for the Petitioners in their rejoinder has also
placed reliance upon the judgment of the Hon'ble Orissa High Court in
Pratap Ghose Security Agency v. IOCL & Ors., W.P. (C) No. 23362/2017
dated 16.08.2018. It is stated that the High Court in this case was dealing
with a challenge to an open tendering process for deployment of security on
the ground it was in violation of an O.M. dated 04.10.2005 modelled on the
same lines as the Impugned O.M. Petitioner No. 1 was one of the
Respondents in this case and the High Court dismissed the writ petition and
refused to interfere with the open tendering process for deployment of
security at terminals under the jurisdiction of Indian Oil Corporation Ltd.
22. In rejoinder, Ld. Senior Counsel for the Petitioners has also placed
reliance upon a decision of the Hon'ble Orissa High Court dated 14.07.2009
passed in W.P. (C) No. 10517/2008, titled as G4S Security vs. DGR & Ors.
It is stated by the Learned Counsel for the Petitioner that the Court in the
aforesaid case was dealing with a challenge to an O.M. which is similar to
Signature Not Verified
Digitally Signed
Signing Date:16.09.2022
11:00:01
the Impugned O.M. in the present case. In the aforesaid case, the Hon'ble
Orissa High Court held that the O.M. under challenge in those proceedings,
frustrated the purpose of PSARA and was violative of Article 14 of the
Constitution of India, 1950.
23. It is further argued by the Ld. Senior Counsel for the Petitioners that
the Central Government has framed Private Security Agencies Central
Model Rules, 2006 ("Model Rules") which provides safeguards for adequate
security training of security guards and for verification of character and
antecedents to persons being employed by PSAs.
24. Heard the Counsels appearing for the Petitioners and the Respondents,
and perused the material on record.
25. The Petitioners have challenged the Impugned O.M. on the ground
that it is violative of Article 14 of the Constitution of India, 1950 inasmuch
as it creates a sub-classification amongst all PSAs which is not based on any
intelligible differentia and bears no rational nexus with the object sought to
be achieved and the same is wholly arbitrary, capricious and unreasonable.
The Petitioners have also challenged the tender which has been issued
pursuant to the Impugned O.M. To appreciate the arguments advanced by
the Petitioners, it is necessary to discuss the test of reasonable classification
under Article 14 of the Constitution as laid down in various judgments of the
Hon'ble Supreme Court.
26. A 7-Judge Constitution Bench of the Supreme Court in State of W.B.
vs. Anwar Ali Sarkar, 1952 SCR 284, was dealing with a challenge to the
West Bengal Special Courts Act, 1950 on the ground that it offends Article
14 of the Constitution of India. The Court interpreted Article 14 of the
Constitution and analysed the scope, meaning and effect of Article 14. It is
in this case that the test of reasonable classification was first defined. The
Signature Not Verified
Digitally Signed
Signing Date:16.09.2022
11:00:01
relevant paragraph of the judgment reads as follows:
"55... It is now well established that while Article 14 is
designed to prevent a person or class of persons from
being singled out from others similarly situated for the
purpose of being specially subjected to discriminating
and hostile legislation, it does not insist on an "abstract
symmetry" in the sense that every piece of legislation
must have universal application. All persons are not, by
nature, attainment or circumstances, equal and the
varying needs of different classes of persons often
require separate treatment and, therefore, the
protecting clause has been construed as a guarantee
against discrimination amongst equals only and not as
taking away from the State the power to classify persons
for the purpose of legislation. This classification may be
on different bases. It may be geographical or according
to objects or occupations or the like. Mere
classification, however, is not enough to get over the
inhibition of the Article. The classification must not be
arbitrary but must be rational, that is to say, it must
not only be based on some qualities or characteristics
which are to be found in all the persons grouped
together and not in others who are left out but those
qualities or characteristics must have a reasonable
relation to the object of the legislation. In order to pass
the test, two conditions must be fulfilled, namely, (1)
that the classification must be founded on an
intelligible differentia which distinguishes those that
are grouped together from others and (2) that that
differentia must have a rational relation to the object
sought to be achieved by the Act. The differentia
which is the basis of the classification and the object
of the Act are distinct things and what is necessary is
that there must be a nexus between them. In short,
while the Article forbids class legislation in the sense
of making improper discrimination by conferring
privileges or imposing liabilities upon persons
arbitrarily selected out of a large number of other
persons similarly situated in relation to the privileges
Signature Not Verified
Digitally Signed
Signing Date:16.09.2022
11:00:01
sought to be conferred or the liability proposed to be
imposed, it does not forbid classification for the
purpose of legislation, provided such classification is
not arbitrary in the sense I have just explained. The
doctrine, as expounded by this Court in the two cases I
have mentioned, leaves a considerable latitude to the
Court in the matter of the application of Article 14 and
consequently has the merit of flexibility."
(emphasis supplied)
27. The Hon'ble Supreme Court in Special Courts Bill, 1978, In re,
(1979) 1 SCC 380, dealt with a reference by the President of India for
considering the constitutional validity of the Special Courts Bill, 1978. The
Court undertook an exhaustive review of decisions dealing with the scope,
content and meaning of Article 14 [See Budhan Choudhry v. State of Bihar,
(1955) 1 SCR 1045; Ram Krishna Dalmia v. S.R. Tendolkar, 1959 SCR
279; C.I. Emden v. State of U.P., (1960) 2 SCR 592; Kangsari Haldar v.
State of W.B., (1960) 2 SCR 646; Jyoti Pershad v. Administrator for Union
Territory of Delhi, (1962) 2 SCR 125 and State of Gujarat v. Shri Ambica
Mills Ltd., (1974) 4 SCC 656] and reiterated the test for reasonable
classification in the following words:
"(7) The classification must not be arbitrary but must be
rational, that is to say, it must not only be based on some
qualities or characteristics which are to be found in all
the persons grouped together and not in others who are
left out but those qualities or characteristics must have
a reasonable relation to the object of the legislation. In
order to pass the test, two conditions must be fulfilled,
namely, (1) that the classification must be founded on
an intelligible differentia which distinguishes those
that are grouped together from others and (2) that that
differentia must have a rational relation to the object
sought to be achieved by the Act.
Signature Not Verified
Digitally Signed
Signing Date:16.09.2022
11:00:01
(8) The differentia which is the basis of the
classification and the object of the Act are distinct
things and what is necessary is that there must be a
nexus between them. In short, while Article 14 forbids
class discrimination by conferring privileges or
imposing liabilities upon persons arbitrarily selected
out of a large number of other persons similarly
situated in relation to the privileges sought to be
conferred or the liabilities proposed to be imposed, it
does not forbid classification for the purpose of
legislation, provided such classification is not
arbitrary in the sense abovementioned.
***
(12) Whether an enactment providing for special
procedure for the trial of certain offences is or is not
discriminatory and violative of Article 14 must be
determined in each case as it arises, for, no general
rule applicable to all cases can safely be laid down. A
practical assessment of the operation of the law in the
particular circumstances is necessary."
(emphasis supplied)
28. In Natural Resources Allocation, In re, Special Reference No. 1 of
2012, (2012) 10 SCC 1, the Hon'ble Supreme Court while dealing with a
reference by the President of India under Article 143 of the Constitution was
considering the validity of the policy of having auctions as the only
permissible method for disposal of all natural resources across all sectors
and in all circumstances. The Court in its decision discussed the mandate of
Article 14, including the test of "classification" and reiterated that Article 14
permits reasonable classification. The following excerpt from the judgment
is of relevance:
"183. The parameters laid down by this Court on the
scope of applicability of Article 14 of the Constitution of
India, in matters where the State, its instrumentalities,
and their functionaries, are engaged in contractual
Signature Not Verified
Digitally Signed
Signing Date:16.09.2022
11:00:01
obligations (as they emerge from the judgments
extracted in paras 159 to 182, above) are being briefly
paraphrased. For an action to be able to withstand the
test of Article 14 of the Constitution of India, it has
already been expressed in the main opinion that it has
to be fair, reasonable, non-discriminatory,
transparent, non-capricious, unbiased, without
favouritism or nepotism, in pursuit of promotion of
healthy competition and equitable treatment. The
judgments referred to, endorse all those requirements
where the State, its instrumentalities, and their
functionaries, are engaged in contractual
transactions. Therefore, all "governmental policy"
drawn with reference to contractual matters, it has
been held, must conform to the aforesaid parameters.
While Article 14 of the Constitution of India permits a
reasonable classification having a rational nexus to
the object sought to be achieved, it does not permit the
power of pick and choose arbitrarily out of several
persons falling in the same category. Therefore,
criteria or procedure have to be adopted so that the
choice among those falling in the same category is
based on reason, fair play and non-arbitrariness. Even
if there are only two contenders falling in the zone of
consideration, there should be a clear, transparent and
objective criteria or procedure to indicate which out of
the two is to be preferred. It is this, which would ensure
transparency." (emphasis supplied)
29. From the aforementioned decisions of the Hon'ble Supreme Court, it
is clear that Article 14 permits reasonable classification and State action
which satisfies the test for reasonable classification would not be in violation
of Article 14. The twin requirements of the test of reasonable classification
are reiterated as follows:
i. The classification must be founded on an intelligible differentia
which distinguishes persons or things that are grouped together
Signature Not Verified
Digitally Signed
Signing Date:16.09.2022
11:00:01
from others left out of the group; and
ii. The differentia must have a rational relation to the object sought to
be achieved
30. The principle of equality enshrined within Article 14 of the
Constitution is based upon the treatment of equals equally or treating likes
as alike. This has been held to mean that even among likes, if a classification
has been made on real and intelligible criteria, then they can be treated
differently. The principles governing reasonable classification which have
been stated hereinabove are thus also applicable to sub-classes which have
been created within a class. The Hon'ble Supreme Court in the case of State
of W.B. v. Rash Behari Sarkar, (1993) 1 SCC 479 was dealing with a
challenge to a notification issued under the Bengal Amusements Tax Act,
1922. The notification exempted from payment of entertainment tax, any
performance by a bona fide group theatre, amateur theatre or amateur jatra,
formed exclusively for purposes of cultural activities and not for monetary
gains. This tax exemption was not given to theatre groups which performed
for monetary gains. Even though both groups were theatre groups, the
Hon'ble Court in this case held that this classification was reasonable, not
arbitrary and thus not in violation of Article 14. The Court stated the
following:
"4. Equality means equality in similar circumstances
between same class of persons for same purpose and
objective. It cannot operate amongst unequals. Only
likes can be treated alike. But even amongst likes the
legislature or executive may classify on distinction
which are real. A classification amongst groups
performing shows for monetary gains and cultural
activities cannot be said to be arbitrary. May be that
both the groups carry out the legislative objective of
promoting social and educational activities and,
Signature Not Verified
Digitally Signed
Signing Date:16.09.2022
11:00:01
therefore, they are likes but the distinction between the
two on monetary gains and otherwise is real and
intelligible. So long the classification is reasonable it
cannot be struck down as arbitrary. Likes can be
treated differently for good and valid reasons. The
State in treating the group performing theatrical
shows for advancement of social and educational
purpose, differently, on basis of profit-making from
those formed exclusively for cultural activities cannot
be said to have acted in violation of Article 14."
(emphasis supplied)
31. In State of Kerala vs. Aravind Ramakant Modawdakar, (1999) 7 SCC
400, the Apex Court was concerned with an appeal arising out of a decision
of the Appellate Bench of the Kerala High Court. The case was concerning a
challenge to an amendment to the Schedule of the Kerala Motor Vehicles
Taxation Act, 1976 which enhanced the rate of quarterly tax in respect of
inter-State carriage operators. The challenge was based on the ground that
the reduction of tax liability in favour of the vehicles covered by intra-State
contract carriage permit without granting the same to inter-State contract
carriages amounted to a violation of Article 14 of the Constitution. The
Court in this case noted that even though both inter-State and intra-State
operators, were in a generic sense, State carriage operators, there was a
reasonable distinction between the two. The Court in this regard held as
follows:
"10. The validity of Section 22 of the Act has not been
questioned which section empowers the State in public
interest to grant exemptions in such a manner as it
deems fit to a class of people. Once we hold that the
contract carriages covered by intra-State permits and
inter-State permits can form two distinct and separate
classes within the larger class of contract carriages,
we find it difficult to hold that this classification is
either unreasonable or it lacks a nexus to the object or
Signature Not Verified
Digitally Signed
Signing Date:16.09.2022
11:00:01
is violative of Article 14. The opinion as to public
interest contemplated under Section 22 of the Act will
have to be formed by the State after taking into
consideration the various factors which affect the public
at large. Definitely, in the absence of a challenge to this
decision-making process on facts, it will not be open to
us to substitute our views in this matter to that of the
opinion formed by the State. For the reasons stated
above, with respect, we are unable to concur with the
judgment of the Appellate Bench of the Kerala High
Court which is impugned before us and the same is set
aside."
(emphasis supplied)
32. The Apex Court, recently, in Manish Kumar v. Union of India, (2021)
5 SCC 1 after analysing various decisions has held that the law permits the
creation of a sub-class within a class and the same is not antithetical to the
guarantee of equality under Article 14 of the Constitution. It further held that
the principles which govern the legitimacy of a sub-class are the same as
those governing reasonable classification permissible under Article 14 of the
Constitution. The relevant paragraph from the judgment is reproduced as
under:
"231.We are of the view that the principles, which
governed the legitimacy of the sub-class within a class,
is based, essentially, on the very principles, which are
discernible in regard to reasonable classification
under Article 14. It is clear that the law does not
interdict the creation of a class within a class
absolutely. Should there be a rational basis for
creating a sub-class within a class, then, it is not
impermissible. This is the inevitable result of an
analysis of the judgments relied upon by the petitioner
themselves viz. Sansar Chand Atri v. State of Punjab
[Sansar Chand Atri v. State of Punjab, (2002) 4 SCC
154 : 2002 SCC (L&S) 770] . The decisions, which
have been relied upon by the Union and which we
Signature Not Verified
Digitally Signed
Signing Date:16.09.2022
11:00:01
have adverted to, clearly indicate that a class within a
sub-class, is indeed not antithetical to the guarantee of
equality under Article 14." (emphasis supplied)
33. From the discussion above, it is abundantly clear that there exists no
absolute bar on the creation of a sub-class within a class and the same is
permissible under Article 14 of the Constitution. The principles on which
the test of reasonable classification has been formulated apply equally to
sub-classes, meaning thereby, the validity of a sub-class must also be based
on the twin test of reasonable classification formulated under Article 14.
34. A 5-Judge Bench of the Supreme Court in the case of Confederation
of Ex-Servicemen Assns. v. Union of India, (2006) 8 SCC 39 had an
opportunity to discuss the classification of Ex-Servicemen and whether the
same was reasonable. The Court in this case was concerned with a Public
Interest Litigation to recognise the right of full and free medical care of ex-
servicemen, their families and dependents. The Court in this case held that a
classification between in-service employees and retirees (ex-servicemen)
was legal, valid and a reasonable classification. The Court further held that a
classification between defence personnel and persons other than defence
personnel is also a reasonable and valid classification.
35. Having discussed the law on the subject, let us at this juncture analyse
as to whether the Impugned O.M. and the Impugned Tenders create a
classification which is reasonable and permissible under Article 14 of the
Constitution. In the facts of the present case, the Impugned O.M. provides
that a CPSE may obtain security services only from PSAs empanelled with
Respondent No. 5. A PSA which provides employment to ex-servicemen is
entitled to empanelment with the Respondent No. 5. The basis of creating a
Signature Not Verified
Digitally Signed
Signing Date:16.09.2022
11:00:01
classification between agencies which employ ex-servicemen and those
which do not employ ex-servicemen has been explained by the Respondents
as follows:
i. Ex-Servicemen are in a class of their own as they receive intensive
and specialised training under the armed forces.
ii. Ex-Servicemen are subject to intense scrutiny throughout their
years of service which requires them to maintain the highest
standards of conduct and their antecedents are scrupulously
verified.
iii. There is a need for specialised security for national assets under
the control of CPSEs as several of them are strategically important
for the State.
36. The Impugned O.M. has been issued with the objective of laying
down guidelines for appointment of security personnel in CPSEs which are
in control of national assets of strategic importance to the State and are thus
in need for specialised security. Ex-Servicemen, by virtue of having
received specialised training as part of their service are better suited to
provide specialised security services to CPSEs qua civil guards employed by
PSAs who have not received such intensive training. Ex-Servicemen are also
subject to extensive scrutiny vis-à-vis their conduct and antecedents while
they are in service. Additionally, the Impugned O.M. furthers the cause of
welfare of ex-servicemen by providing them an opportunity to provide
security to CPSEs. The decision of the government to evolve a scheme to
empanel only those security agencies which are managed/operated/run by
Ex-Army personnel, who will give more importance and would be more
sensitive to the needs of Ex-Army personnel cannot be found fault with.
37. In our view, the aforementioned criterion provides for intelligible
Signature Not Verified
Digitally Signed
Signing Date:16.09.2022
11:00:01
differentia on the basis of which a classification has been made between
PSAs which employee ex-servicemen and those which do not employee ex-
servicemen. The objective of the Impugned O.M. is to provide specialised
security to national assets under the control of CPSEs as well as the welfare
of Ex-Servicemen. The differentia therefore bears reasonable nexus with the
object sought to be achieved by it. The classification is also in consonance
with the decision of the Supreme Court in Confederation of Ex-Servicemen
Assns. (supra). The Impugned O.M. therefore satisfies the twin requirements
of the test of reasonable classification under Article 14. Resultantly, the
Impugned Tenders, having been framed in consonance with the Impugned
O.M. also satisfy the test for reasonable classification under Article 14 of the
Constitution.
38. We find no merit in the Petitioner's contention that sub-classification
is impermissible under Article 14 of the Constitution. The reliance placed by
the Petitioners upon the decision in Comptroller & Auditor-General (supra)
does not aid their case as it is now well settled that sub-classification is not
antithetical to Article 14 of the Constitution as per the law analysed and laid
down by the Hon'ble Supreme Court in Manish Kumar (supra). The twin
test of intelligible differentia and reasonable nexus which is used to
determine whether a classification is reasonable are applicable in
determining the validity of a sub-classification.
39. The judgment in Comptroller & Auditor-General (supra) is also
distinguishable on facts and is not applicable to the facts of the present case.
Firstly, the decision in Comptroller & Auditor-General (supra) does not state
that there is an absolute bar on the creation of a sub-class under Article 14 of
the Constitution. The sub-classification in that case was struck down on the
basis that it was not made on a rational basis and was not reasonable. In that
Signature Not Verified
Digitally Signed
Signing Date:16.09.2022
11:00:01
case, the Auditors were "qualified and eligible" to be appointed as Auditors
but were not appointed as they worked in a proprietary firm and not a
partnership firm. Regardless of whether an auditor worked at a proprietary
firm or a partnership firm, the training undergone remained the same
between the two persons and thus a differentiation based on whether the
auditor works at a proprietary or a partnership firm was held not to be
reasonable. In the present case the Petitioners are not qualified and eligible
for being appointed to provide security services to CPSEs as per the
Impugned O.M. and the Impugned Tenders. In the present case, the level of
training, standards of conduct and scrutiny of antecedents which persons
who are ex-servicemen and persons who are not ex-servicemen undergo are
starkly different and thus there is a reasonable distinction in their
qualifications even though both work for licensed PSAs. As stated above,
the distinction created by the Impugned O.M. between PSAs which employ
ex-servicemen and PSA which do not employ ex-servicemen is based on
intelligible differentia which has reasonable nexus with the object sought to
be achieved by it. Therefore, the Impugned O.M. and the Impugned Tenders
create a reasonable classification which is not in violation of Article 14 of
the Constitution.
40. As the Petitioners have also presented a challenge the Impugned
Tenders for being violative of Article 14 and 19(1)(g) of the Constitution,
this Court, at this juncture deems it appropriate to delineate the scope of
interference by a Court exercising power of judicial review in respect of
contract entered into on behalf of the State. It has been observed consistently
by the Supreme Court in a number of judgments that the Court may interfere
in an administrative decision, if and only if the same is arbitrary, irrational,
unreasonable, mala fide or biased. The Hon'ble Supreme Court in Tata
Signature Not Verified
Digitally Signed
Signing Date:16.09.2022
11:00:01
Cellular v. Union of India, (1994) 6 SCC 651, has stated as follows:
"70. It cannot be denied that the principles of judicial
review would apply to the exercise of contractual
powers by Government bodies in order to prevent
arbitrariness or favouritism. However, it must be
clearly stated that there are inherent limitations in
exercise of that power of judicial review. Government is
the guardian of the finances of the State. It is expected to
protect the financial interest of the State. The right to
refuse the lowest or any other tender is always available
to the Government. But, the principles laid down in
Article 14 of the Constitution have to be kept in view
while accepting or refusing a tender. There can be no
question of infringement of Article 14 if the Government
tries to get the best person or the best quotation. The
right to choose cannot be considered to be an arbitrary
power. Of course, if the said power is exercised for any
collateral purpose the exercise of that power will be
struck down."
41. The Hon'ble Supreme Court in Central Coalfields Ltd. v. SLL-SML
(Joint Venture Consortium), (2016) 8 SCC 622, relying upon Tata Cellular
(supra) and Jagdish Mandal v. State of Orissa, (2007) 14 SCC 517, has held
that the if an administrative decision is not arbitrary, irrational,
unreasonable, mala fide or biased, the Courts will not sit as an appellate
authority and interfere with the decision. A contract is a commercial
transaction, meaning thereby that evaluating tenders and awarding contracts
are essentially commercial functions and principles of equity and natural
justice stay at a distance. If the decision relating to award of contract is bona
fide and in public interest, the 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 cannot be permitted to be invoked to protect private interest at the
Signature Not Verified
Digitally Signed
Signing Date:16.09.2022
11:00:01
cost of public interest or to decide contractual disputes.
42. Summing up the principles laid down in Tata Cellular (supra), Jagdish
Mandal (supra), Dwarkadas Marfatia and Sons v. Board of Trustees of the
Port of Bombay, (1989) 3 SCC 293, and Central Coalfields (supra), the
Hon'ble Supreme Court in Afcons Infrastructure Ltd. v. Nagpur Metro Rail
Corpn. Ltd., (2016) 16 SCC 818, stated:
"13. In other words, a mere disagreement with the
decision-making process or the decision of the
administrative authority is no reason for a
constitutional court to interfere. The threshold of
mala fides, intention to favour someone or
arbitrariness, irrationality or perversity must be met
before the constitutional court interferes with the
decision-making process or the decision."
(emphasis supplied)
43. In Silppi Constructions Contractors v. Union of India, (2020) 16 SCC
489, the Hon'ble Supreme Court has followed the aforesaid judgments and
reiterated the principle that Courts should exercise a lot of restraint while
exercising powers of judicial review in contract or commercial matters. The
relevant portion of the Judgment is reproduced as under:
"19. This Court being the guardian of fundamental
rights is duty-bound to interfere when there is
arbitrariness, irrationality, mala fides and bias.
However, this Court in all the aforesaid decisions has
cautioned time and again that courts should exercise a
lot of restraint while exercising their powers of judicial
review in contractual or commercial matters. This
Court is normally loathe to interfere in contractual
matters unless a clear-cut case of arbitrariness or
mala fides or bias or irrationality is made out. One
must remember that today many public sector
undertakings compete with the private industry. The
contracts entered into between private parties are not
subject to scrutiny under writ jurisdiction. No doubt,
Signature Not Verified
Digitally Signed
Signing Date:16.09.2022
11:00:01
the bodies which are State within the meaning of
Article 12 of the Constitution are bound to act fairly
and are amenable to the writ jurisdiction of superior
courts but this discretionary power must be exercised
with a great deal of restraint and caution. The courts
must realise their limitations and the havoc which
needless interference in commercial matters can
cause. In contracts involving technical issues the
courts should be even more reluctant because most of
us in Judges' robes do not have the necessary
expertise to adjudicate upon technical issues beyond
our domain. As laid down in the judgments cited
above the courts should not use a magnifying glass
while scanning the tenders and make every small
mistake appear like a big blunder. In fact, the courts
must give "fair play in the joints" to the government
and public sector undertakings in matters of contract.
Courts must also not interfere where such
interference will cause unnecessary loss to the public
exchequer." (emphasis supplied)
44. From the aforestated judgments, it is clear that the scope of
interference by way of judicial review in commercial matters is extremely
limited and can only be justified when a case of arbitrariness,
unreasonableness, mala fide, bias or irrationality is clearly made out. In the
absence of the same, the Courts should exercise restraint and not interfere
even if a procedural aberration or error in assessment or prejudice to a
tenderer is made out.
45. It is the case of the Petitioners that the method of selection used by the
Respondent in selecting PSAs for providing security services to CPSEs is
unreasonable and arbitrary and thus violative of Article 14. In support of this
contention the Petitioner has relied upon CVC's Office Order No. 23/7/07
dated 05.07.2017, the General Financial Rules, 2017 and the Manual for
Procurement of Consultancy & Other Services, 2017.These documents
Signature Not Verified
Digitally Signed
Signing Date:16.09.2022
11:00:01
reiterate the principles laid down in Nova Ads (supra), which relies upon
Ramana Dayaram Shetty (supra) and Nagar Nigam, Meerut (supra).The
relevant extract from Nova Ads (supra) reads as follows:
"56. It is well settled in law that wherever a contract is
to be awarded or a licence is sought to be given, it is
obligatory on the part of the public authority to adopt a
transparent and fair method. It serves two purposes,
namely, participation of all eligible competitors and
giving a fair opportunity to them and also generating
maximum revenue. In this context, we may profitably
refer to a two-Judge Bench in Nagar Nigam, Meerut v.
Al Faheem Meat Exports (P) Ltd. [(2006) 13 SCC 382] ,
wherein it has been held as follows : (SCC p. 395, para
16)
"16. The law is well settled that contracts by the
State, its corporations, instrumentalities and
agencies must be normally granted through public
auction/public tender by inviting tenders from
eligible persons and the notification of the public
auction or inviting tenders should be advertised in
well-known dailies having wide circulation in the
locality with all relevant details such as date, time
and place of auction, subject-matter of auction,
technical specifications, estimated cost, earnest
money deposit, etc. The award of government
contracts through public auction/public tender is to
ensure transparency in the public procurement, to
maximise economy and efficiency in government
procurement, to promote healthy competition among
the tenderers, to provide for fair and equitable
treatment of all tenderers, and to eliminate
irregularities, interference and corrupt practices by
the authorities concerned. This is required by Article
14 of the Constitution.""
46. Undoubtedly, grant of Government largesse by the State, its
Signature Not Verified
Digitally Signed
Signing Date:16.09.2022
11:00:01
corporations, instrumentalities and agencies through contracts must be done
through a transparent and fair method. As a general rule, this must be done
through the process of public auction/public tender by inviting tenders from
eligible persons. However, the present case is not one of grant of
government largesse. As far as providing security to the administrative
Ministries/Departments is concerned, a scheme has been evolved by the
government that security to such offices will be provided by the security
agencies which are run by Ex-servicemen and employs only Ex-servicemen.
47. The Impugned O.M. and Impugned Tenders are in consonance with
the law laid down by the Hon'ble Supreme Court in the aforementioned
decisions. In the present case the contracts for security of CPSEs have been
granted by issuing tenders and inviting bids by eligible PSAs following a
competitive bidding method for selection. The Impugned O.M. expressly
states that in order to get cost effective and efficient security, Respondent
No. 5 will sponsor more than one security agency so that the concerned
CPSE has a choice in choosing a suitable PSA as per their specific
requirements. Similarly, the Impugned Tenders issued invite bids from PSAs
which are eligible as per the Bid Evaluation Criteria provided for in the
Tender Notice. The Bid Evaluation Criteria in clear terms states that the
bidding agency must be empanelled with/sponsored by Respondent No. 5 in
order to be eligible to bid for the Impugned Tenders, and is in consonance
with the Impugned O.M. The Impugned Tenders provide for a well-defined
evaluation procedure on the basis of which Letter of Acceptance will be
issued, thereby removing any scope of arbitrariness in the manner in which
the Respondent exercises its choice. It is thus clear that both the Impugned
O.M. and Impugned Tenders have followed the law laid down by the
Hon'ble Supreme Court and follow a transparent, reasonable and fair
Signature Not Verified
Digitally Signed
Signing Date:16.09.2022
11:00:01
method which is in conformity with Article 14 of the Constitution.
48. The Petitioners also placed reliance upon the decision of the Hon'ble
Orissa High Court in Pratap Ghose Security Agency (supra) wherein an
O.M. modelled on similar lines as the impugned O.M. was challenged and
the Petitioner No. 1 was one of the Respondents in the case. The High Court
in this case observed that the contract awarded to the petitioner therein was
awarded with the specific condition that it can be foreclosed at any time. It
further observed that there existed an arbitration clause and the petitioner
therein could claim damages by going to arbitration. The Court dismissed
the case without entering into the merits of the challenge to O.M. and
refused to exercise its discretionary jurisdiction under Article 226 of the
Constitution. In our view, this judgment does not come to the rescue of the
Petitioners as it is wholly inapplicable to the facts of the present case as the
same was dismissed without entering into a discussion on the merits of the
challenge to the O.M. and was dismissed as the petitioner therein could avail
a remedy by initiating arbitration proceedings.
49. The Petitioner has also submitted that subsequent to the enactment of
PSARA and the Private Security Agencies Central Model Rules, 2006
framed there under, the Impugned O.M. has lost its utility and purpose. The
Petitioner has relied upon the judgment of the Hon'ble Orissa High Court in
G4S Security Services v. Director General of Resettlement, W.P. (C)
10517/2008 to support this contention. In this case, the O.M. impugned
provided that CPSEs must obtain security services from the Directorate
General of Resettlement or State ESM Corporations for sponsoring Ex-
Servicemen Security Agencies on the Panel. The Court therein, held that the
O.M. discriminates against ex-servicemen engaged by PSAs not empanelled
with DGR which would frustrate the purpose of PSARA and violate Article
Signature Not Verified
Digitally Signed
Signing Date:16.09.2022
11:00:01
14 of the Constitution.
50. In view of the reasoning given in this Judgment, this Court is not
persuaded to follow the view taken by the High Court of Orissa. The
objective behind the enactment of PSARA and Model Rules framed
thereunder is to regulate private security agencies so they are run within
legal parameters and are accountable to a regulatory mechanism. The
Impugned O.M. on the other hand has been issued to provide necessary
guidelines to be followed by CPSEs when appointing security personnel in
CPSEs and the same is limited to CPSEs only. Further, the enactment of
PSARA does not vest a right in any PSA to be appointed by CPSEs. The
aims and objectives sought to be achieved by PSARA and the Impugned
O.M. are distinct and therefore it cannot be said that the enactment of
PSARA has rendered otiose the utility and purpose of the Impugned O.M.
51. The Petitioners' contention that the Impugned O.M. and Impugned
Tenders violate their fundamental right under Article 19(1)(g) of the
Constitution is also without merit. It has been held in Michigan Rubber
(India) Ltd. v. State of Karnataka, (2012) 8 SCC 216, that when the State or
its instrumentalities act reasonably, fairly and in public interest in awarding
a Contract, interference by Court is very restrictive and no person can claim
a fundamental right to carry business with the Government. The Petitioners
herein cannot claim a right to provide security for CPSEs when they are not
eligible for the same as per the Impugned O.M. and the Impugned Tender.
Furthermore, the Petitioners are not prohibited from providing security
services for all bodies which are not CPSEs. The Impugned O.M. and the
Impugned Tenders therefore do not violate Article 19(1)(g) of the
Constitution.
52. At this juncture, it is pertinent to state that, the Impugned Tender has
Signature Not Verified
Digitally Signed
Signing Date:16.09.2022
11:00:01
been finalised and awarded to successful bidders on 29.06.2019.Similarly,
the Impugned Tender II, Impugned Tender III and Impugned Tender IV
have also been allotted to successful bidders. Further, the successful bidders
have not been made a party to the proceedings before us.
53. In light of the foregoing, it is held that the Impugned O.M. and the
Impugned Tenders are not in violation of Article 14 and Article 19(1)(g) of
the Constitution of India, 1950. No case of arbitrariness, unreasonableness,
mala fide, bias or irrationality has been made out by the Petitioners in the
present case.
54. With these observations, the present writ petition is dismissed, along
with pending application(s), if any.
SATISH CHANDRA SHARMA, C.J.
SUBRAMONIUM PRASAD, J
SEPTEMBER 14, 2022
Rahul
Signature Not Verified
Digitally Signed
Signing Date:16.09.2022
11:00:01
