High Court of Gujarat Rules Non-Disclosure of Minimum Wages Act Violations in Tender Affidavit Doesn't Warrant Debarment: M/s. DG Nakrani Case

In a significant ruling concerning public procurement fairness, the High Court of Gujarat has set aside an order by the Surat Municipal Corporation (SMC) that debarred a sanitation service provider for allegedly filing a false disclosure in their tender documents. The court clarified the distinction between statutory labor disputes and "police cases," providing much-needed clarity for contractors navigating complex tender affidavits.

The Anatomy of the Dispute

The petitioner, M/s. DG Nakrani, had successfully emerged as the L1 (lowest) bidder for providing sanitation services at the SMIMER Hospital. However, their contract was put on hold after the editor of a local publication, Daily Mitra Darpan , filed a complaint alleging that the firm had suppressed critical information in its "Criminal Liability Undertaking."

Specifically, the SMC claimed that the firm failed to disclose its history of blacklisting and existing criminal complaints under the Minimum Wages Act, 1948. Consequently, the Corporation passed Resolution No. 804 of 2025, which not only debarred the petitioner for two years but also forfeited their Earnest Money Deposit (EMD) and ordered the filing of a police complaint for perjury.

Arguments: What Defines a "Police Case"?

The petitioner, represented by Senior Advocate Mr. Mihir Thakore, argued that the premise of the debarment was legally flawed on two primary counts: 1. The Nature of Offense: The petitioner contended that cases filed by employees under the Minimum Wages Act before an Additional Chief Judicial Magistrate are not "police cases"—the term specifically requiring registration under Section 154 of the Cr.P.C. (now Section 173 of the BNSS ). Therefore, the failure to report these as police cases did not constitute an "assertion of falsehood." 2. The Blacklisting Myth: The petitioner clarified that while a blacklisting order had been passed in 2017, it was subsequently annulled in 2018. Since the order did not exist at the time of the 2023 tender, the firm was under no obligation to disclose it.

The respondent, the Surat Municipal Corporation, maintained that the omission was a deliberate suppression of material facts, asserting that their vigilance inquiry justified the stiff punitive measures taken against the firm.

Legal Analysis: Distinguishing Labor Disputes from Criminality

The bench, comprising Justices A.S. Supehia and L.S. Pirzada, scrutinized the language of the "Criminal Liability Undertaking." The court observed that the tender document explicitly demanded disclosure of "police cases" and cases initiated by regulatory bodies like the CBI, FEMA, or Income Tax authorities.

The court drew a clear line between regulatory compliance and police investigations:

> "A ‘police case’ is governed by Section 154 of the Cr.P.C. (now Section 173 of the BNSS ), 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."

Furthermore, addressing the historical blacklisting, the court noted that as the 2017 order had been neutralized, the duty to disclose it disappeared, especially in the absence of a specific tender condition requiring disclosure of cancelled past records.

Key Observations

• On the definition of police cases: "Respondent No.2 – Corporation has erred in considering complaints under the Minimum Wages Act, 1948, filed by the employees against the petitioner, as police cases. Hence, it cannot be said that the petitioner has made any false assertion in the affidavit."
• On the arbitrariness of the decision: "The Standing Committee, by the impugned resolution, ignored the same and also decided to register a criminal offence against the petitioner for filing a false affidavit. Hence, we are of the considered opinion that the decision taken... is illegal and arbitrary."
• On tender equity: "There is no condition pointed out to this Court by the respondents mandating that the petitioner must mention blacklisting even if such action has been subsequently cancelled/annulled."

Final Ruling and Implications

The High Court quashed and set aside Resolution No. 804 of 2025, directing the Surat Municipal Corporation to release the firm's EMD within two weeks.

Given that the tender process had moved forward and another bidder had recently been identified as L1, the court has directed the Corporation to reconsider the petitioner's standing in light of this judgment. This ruling serves as a vital reminder to municipal bodies that administrative punitive actions—particularly debarment—must be rooted in strict legal definitions rather than a broad, informal interpretation of "misconduct." For private businesses, the judgment underscores the importance of precision in pre-bid declarations to avoid the devastating consequences of administrative blacklisting.