Supreme Court: No Mandatory Minimum Procurement Right For Individual MSE; Bodies Under MSME Act Subject To Judicial Review
The Supreme Court directed the authorities to redress the imposition of unreasonable conditions in tenders floated by Government Departments or agencies that put Micro and Small Enterprises at a disadvantage.
The Supreme Court has clarified that while an individual MSE does not have a mandatory minimum procurement ‘right,’ authorities under the MSMED Act and the Procurement Order 2012 have a statutorily recognised obligation to implement the mandate, which is subject to judicial review.
The Court had to determine the existence of a ‘right’ of Micro and Small Enterprises (MSE) to supply 25% of goods and services to be procured by the Government and its instrumentalities under its Public Procurement Policy for Micro and Small Enterprises (MSME) Order, 2012 (Procurement Policy).
A Bench of Justice Pamidighantam Sri Narasimha and Justice Sandeep Mehta held “the Public Procurement Policy for Micro and Small Enterprises (MSEs) Order 2012 has force of law as it is formulated in exercise of…power under Section 11 of the Act and also encapsulates the purpose and object of the Act…though there is no mandatory minimum procurement ‘right’ for an individual MSE there is certainly a statutorily recognized obligation on the authorities and the bodies under the Act and the Procurement Order 2012 to implement the mandate which is subject to judicial review.”
Senior Advocates V Giri and Anil Kaushik appeared for the Petitioners, while ASG K.M. Nataraj and Senior AAG Garima Prasad represented the Respondents.
Brief Facts
The Petitioners had argued that they were continuously disqualified from public procurement due to minimum turnover clauses in tender notifications issued by government bodies. They claimed that such clauses were arbitrary and violated Articles 14 and 19 of the Constitution.
The Petitioners filed a Petition under Article 32 of the Constitution seeking directions that government bodies consider MSE bids irrespective of the minimum turnover requirement or, alternatively, quash the tender notifications that contradict the 2012 Policy. They further requested orders directing that any turnover clauses should be confined to revenues from specific drugs.
Court’s Reasoning
The Court considered the provisions of the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act) and the Procurement Policy and held that “there is no mandatory minimum procurement ‘right’ of an individual MSE. However, there is certainly a statutory foundation for the Procurement Preference Policy, 2012, having force of law as it encapsulates a mandate and discloses a specific purpose.”
“Shifting the focus of judicial review to functional capability of these bodies is not to be understood as an argument for alternative remedy, much less as a suggestion for judicial restraint. In fact, this shift is in recognition of an important feature of judicial review, which performs the vital role of institutionalizing authorities and bodies impressed with statutory duties, ensuring they function effectively and efficiently,” the Court remarked.
The Bench explained that the judicial review would primarily ensure “proper constitution and effective functioning” of the authorities the National Board for MSMEs, the Advisory Committee, the Facilitation Council, the Review Committee and the Grievance Cell and leave the policy and decision making to them.
Although it is generally permissible for the government and its instrumentalities to provide minimum turnover criteria wherever “public safety, health, critical security equipment, etc.” are involved, the Court explained that “it must be ensured that such prescriptions do not defeat the Procurement Order 2012. It is necessary to lay down clear guidelines for ministries, departments, and instrumentalities. In fact, it has not been the stand of the Government that the commercial freedom to prescribe minimum turnover clauses on the one hand and the policy to promote MSEs on the other are competing interests or that they have to balance these values.”
Consequently, the Court directed “In this view of the matter, apart from the earlier direction relating to mandatory procurement, we also direct the authorities under the Act, including the Review Committee and in particular the Grievance Cell, which is specifically entrusted with the obligation to redress imposition of unreasonable conditions in tenders floated by Government Departments or agencies that put Micro and Small Enterprises at a disadvantage to examine limits of minimum turnover clauses and issue necessary and appropriate policy guidelines.”
Accordingly, the Supreme Court disposed of the Writ Petition.
Cause Title: Lifecare Innovations Pvt. Ltd. & Anr. v. Union Of India & Ors. (Neutral Citation: 2025 INSC 269)
Appearance:
Petitioners: Senior Advocates V Giri and Anil Kaushik; Advocates Abhishek Mishra, Shashi Sharma, Rajat Rana and Rahul Narang; AOR Rajinder Singh
Respondents: ASG K.M. Nataraj; Senior AAG Garima Prasad; Advocates Vanshaja Shukla, Apporv Kurup, Amit Kumar B, Mayank Pandey, Vinayak Sharma, Amit Sharma-(ii), B.K Satija, Rohit Lochav, Mani Munjal, Marbiang Khongwir, Annirudh Sharma Ii, Vanshaja Shukla, G.M. Kawoosa, Palak Mittal, et al; AOR Amrish Kumar, Vikrant Narayan Vasudeva, Vishnu Shankar Jain, Mukesh Kumar Maroria, Satyakam, Pashupathi Nath Razdan, et al
