Gujarat High Court Quashes Debarment of Firm, Clarifies Distinction Between 'Police Case' and 'Criminal Complaint' in Tender Affidavits

AHMEDABAD: In a significant ruling on tender law and disclosure requirements, the Gujarat High Court has quashed a resolution by the Surat Municipal Corporation (SMC) that debarred a sanitation services firm for two years. A division bench of Justice A.S. Supehia and Justice L. S. Pirzada held that the Corporation wrongly equated criminal complaints under the Minimum Wages Act with "police cases," leading to an arbitrary debarment decision.

The court set aside the SMC's Resolution No. 804 of 2025, which had not only debarred M/S DG Nakrani but also ordered the forfeiture of its Earnest Money Deposit (EMD) and the registration of a criminal offence for allegedly filing a false affidavit.

Background of the Case

The case arose after M/S DG Nakrani emerged as the lowest bidder (L1) for a tender to provide sanitation services at the SMC-run SMIMER Hospital. Although the administrative committee approved the work order, a complaint filed by a local newspaper editor alleged that the firm had provided false information in its "Criminal Liability Undertaking" affidavit submitted with the bid.

Following a vigilance inquiry, the SMC's Standing Committee concluded that the petitioner had made false assertions on two grounds: 1. Failing to disclose pending criminal cases under the Minimum Wages Act, 1948, despite declaring "no police case" was pending. 2. Falsely stating that the firm had never been blacklisted.

Consequently, the SMC passed the impugned resolution to debar the firm. The petitioner, M/S DG Nakrani, challenged this decision in the High Court.

Arguments from Both Sides

Petitioner's Stance: Senior Advocate Mr. Mihir Thakore, representing the petitioner, argued that the debarment was unjust and based on a misinterpretation of the tender's requirements.

* He contended that complaints filed before a magistrate under the Minimum Wages Act do not qualify as "police cases," which typically originate from a First Information Report (FIR). Therefore, the firm's declaration was truthful.

* Regarding the blacklisting, he submitted that while the firm was blacklisted in 2017, the order was subsequently cancelled in 2018. As the tender was floated in 2023, the blacklisting order was not in effect, and the firm was under no obligation to disclose a cancelled order. He also pointed out that the debarment resolution itself did not even mention blacklisting as a reason for the punitive action.

Respondent's Defence: The Surat Municipal Corporation defended its decision, asserting that the petitioner had deliberately suppressed crucial information.

* It argued that cases under the Minimum Wages Act are criminal in nature and should have been disclosed.

* The Corporation maintained that even if the blacklisting order was later set aside, the fact of its initial imposition was a material fact that should have been declared to maintain transparency in the tender process.

Court's Analysis and Pivotal Findings

The High Court meticulously analyzed the language of the "Criminal Liability Undertaking" (Annexure-III) required by the tender.

On the 'Police Case' vs. 'Criminal Complaint' Distinction

The bench found the Corporation's interpretation to be flawed. The judgment drew a clear line between the specific term used in the affidavit and the nature of the cases against the petitioner.

> "A ‘police case’ is governed by Section 154 of the Cr.P.C... which prescribes registration of First Information Reports in cognizable offences... The offence under the Minimum Wages Act, 1948 does not fall within the category of a police case... Thus, such complaints cannot be construed as or given the colour of a police case."

The court concluded that since the tender document specifically asked about "police cases," the petitioner was not required to disclose complaints filed by employees under a special statute like the Minimum Wages Act. The Corporation had erred in broadening the scope of the required disclosure beyond the explicit terms of its own tender document.

On the Blacklisting Allegation

The court noted that the petitioner's blacklisting order from 2017 was cancelled in 2018, long before the tender was issued. Furthermore, it made a crucial observation that the debarment order itself was silent on this issue.

> "In the entire resolution, there is no whisper about the reason assigned by respondent–Corporation for debarring the petitioner on the ground of suppression of its earlier blacklisting... Thus, the petitioner could not have been debarred based on paragraph No.3 of the affidavit."

Final Verdict and Directions

Finding the Surat Municipal Corporation's decision to be "illegal and arbitrary," the High Court quashed and set aside Resolution No. 804 of 2025. The court directed the Corporation to release the forfeited EMD to the petitioner within two weeks.

Regarding the petitioner's request for the issuance of the work order, the court acknowledged that the SMC had already re-tendered the contract. It directed the Corporation to consider the petitioner's case afresh in light of the judgment and pass necessary orders within two weeks, taking into account that the petitioner's bid in a subsequent tender was rejected due to the now-quashed debarment order.