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TMI Blog2025 (3) TMI 372X X X X Extracts X X X X X X X X Extracts X X X X ..... e legal regime concerning the promotion and development of MSEs, we have come to the conclusion that the Procurement Order 2012 has the force of law and is enforceable. While the Act and the Procurement Order 2012 do not create an 'enforceable right' for an individual MSE, the statutory authorities and administrative bodies created thereunder are impressed with enforceable duties. They are accountable and subject to judicial review. We have also explained how the scope of judicial review in these matters should transcend the standard power of judicial review to issue writs of mandamus to perform the statutory duty and proceed to examine whether the duty bearers, the authorities and bodies are constituted properly and whether they are functioning effectively and efficiently. By ensuring institutional integrity we achieve our institutional objectives. 1.2 Having considered the establishment of the National Board for MSMEs, Advisory Committee, Facilitation Council under the statute, and in particular, the establishment of the Review Committee and the Grievance Cell under the Procurement Order 2012, we have issued specific directions to address the issues arising for consideration and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e low since it only deals in specialised areas of medical technology and drugs. In contrast, many of its competitors get to factor in their revenue for multiple drugs that they deal in. 4. The petitioners sought exemptions from the said minimum turnover requirement, but the concerned authorities have not granted the same. Consequently, the Enterprise cannot participate as the difference between the required turnovers and the company's turnovers is often huge. In real terms, while the enterprise's average turnover ranges in the band of Rs. 6-7 crores, the NIT issued by Post Graduate Institute of Medical Education & Research, Chandigarh (PGIMER), in 2017 required the bidders to have a minimum turnover of Rs. 20 crores in the three years preceding the NIT and a cumulative turnover of Rs. 200 crores in the same three years. 5. Previously, the Enterprise had filed a writ petition5 before the High Court of Punjab and Haryana, challenging the NIT issued by PGIMER, Chandigarh in 2017. Similar contentions were raised before the High Court, but the writ petition was dismissed by an order dated 05.04.2017. The petitioners filed a Special Leave Petition6 against the dismissal order, and this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies from MSEs, by prescribing minimum turnover clauses, they are circumventing the mandate, thereby defeating the very purpose and object of the policy. 9. Mr. K. M. Natraj, Ld. Additional Solicitor, assisted by Ms. Vanshaja Shukla, Advocate, representing Union of India, submitted that the policy notifications relied upon by the petitioners had been complied with. Year-wise statistics evidencing Government of India procurement from MSMEs is produced evidencing compliance. It is also submitted that the petitioners' claim pertains to specific conditions of a tender, which is purely contractual in nature, and as such invocation of judicial review is impermissible in law. In any case, the learned ASG would submit that there is no arbitrariness in the specification of the mandatory minimum turnover clause in NIT as the government, or its instrumentalities are entitled to assess the capability of the supplier, which is essential, particularly for procurement of drugs. Similar arguments were advanced by other counsels representing other respondent States and Public Sector undertakings. 10. Issues: The following two questions arise for our consideration: 1. Does the MSMED Act, coupled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indian MSME sector is projected to grow to $1 trillion by 202814. Moreover, MSMEs play a crucial role in promoting rural development, women's employment, and inclusive growth. 19.5% of total MSMEs15 and 70% of informal micro-enterprises are owned by women16. There is undoubtedly a global consensus regarding the indispensable importance of MSMEs". 13. The first statutory recognition of MSMEs, measures for their protection, promotion and grant of special benefits was through the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993.17 The 1993 Act was repealed by the comprehensive and promising regime under the present Micro, Small and Medium Enterprises Development Act in 2006, which not only created different classes of enterprises under Section 7, but also established an Advisory Committee to advise the Central government regarding the classification of enterprises, a National Board for MSMEs under Section 3, the functions of which are provided in Sections 5 and 6, inter alia to deal with, "factors affecting the promotion and development of micro, small and medium enterprises and review the policies and programmes of the Central Government" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry definitions of "small enterprise" and "medium enterprise". ... (g) empower the Central and State Governments to notify preference policies in respect of procurement of goods and services, produced and provided by small enterprises, by the Ministries, departments and public sector enterprises; ..." 15. In exercise of power under Section 11, the Central Government, through its Ministry of Micro, Small and Medium Enterprises, notified the Public Procurement Policy for Micro and Small Enterprises (MSE's) Order 2012. 16. Clauses 2, 3, 5, 8, 11, 12 and 13 of the Procurement Order 2012 are relevant for our purpose, and they are extracted hereinbelow for ready reference: "Cl. 2. Short title and commencement. - (1) This Order is titled as 'Public Procurement Policy for Micro and Small Enterprises (MSEs) Order, 2012'. (2) It shall come into force with effect from 1st April 2012. Cl. 3. Mandatory procurement from Micro and Small Enterprises. - (1) Every Central Ministry or Department or Public Sector Undertaking shall set an annual goal of procurement from Micro and Small Enterprises from the financial year 2012- 13 and onwards, with the objective of achieving an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew Committee has been constituted under the Chairmanship of Secretary, Ministry of Micro, Small and Medium Enterprises, for monitoring and review of Public Procurement Policy for Micro and Small Enterprises vide Order No. 21(1)/2007-MA dated the 21st June 2010 (Annexure). (2) This Committee shall, inter alia, review list of 358 items reserved for exclusive purchase from Micro and Small Enterprises on a continuous basis, consider requests of the Central Ministries or Departments or Public Sector Undertakings for exemption from 20 per cent target on a case to case basis and monitor achievements under the Policy. Cl. 13. Setting up of Grievance Cell. - In addition, a 'Grievance Cell' will be set up in Ministry of Micro, Small and Medium Enterprises for redressing grievances of Micro and Small Enterprises in Government procurement. This cell shall take up issues related to Government procurement raised by Micro and Small Enterprises with Departments or agencies concerned, including imposition of unreasonable conditions in tenders floated by Government Departments or agencies that put Micro and Small Enterprises at a disadvantage." 17. Clause 3 of the policy sets annual goal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; (ii) Review the list of 358 items (as per Appendix) reserved for exclusive purchase from the MSEs based on the feedback received from the Central Ministries/Departments/PSUs; (iii) Review the grievances received from MSEs regarding Government procurement, including imposition of unreasonable conditions in the tenders floated by the Government Departments/PSUs: and (iv) Suggest special measures to be taken by the Central Ministries/Departments for enhancing their procurements from MSEs." 19. Following the enactment, the constitution of the National Board for MSMEs (Section 3), the Advisory Committee (Section 7(2)) and the Facilitation Council (Sections 20 & 21) on the one hand and notification of the Procurement Preference Policy (under Section 11), followed by the constitutions of the Review Committee (Clause 12) and the Grievance Cell (Clause 13) are statutory and executive bodies established to realise the purpose and object of the Act. The planning, promotion and development (Section 9) of the MSEs and the procurement preference policy (Section 11) are to be declared and notified by the Central or State Governments. Procurement Order 2012 also prescribes that Annual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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'.19 Clause 3 of the policy mandating procurement of 25 per cent of supply from MSEs is simply the statutory duty of the bodies constituted under the Act and the Policy. The significance of creation and establishment of these statutory and administrative bodies is not difficult to conceive. If these institutions and bodies work effectively and efficiently, it is but natural that the purpose and object of the legislation will be achieved in a substantial measure. It is, therefore, necessary to ensure that in the functioning of these bodies, there is efficiency in administration, expertise through composition, integrity through human resources, transparency and accountability, and response-ability through regular review, audits and assessments. 22. While exercising judicial review of administrative action in the context of Statutes, laws, rules or policies establishing statutory or administrative bodies to implement the provisions of the Act or its policy, the first duty of constitutional courts is to ensure that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sure effective implementation of environmental laws. These bodies constitute the backbone of environmental governance in our country. They need to function with efficiency, integrity, and independence. As duty-bearers, they are also subject to accountability. 28. We may ask a simple question - how effectively are these environmental bodies functioning today? This question has a direct bearing on the protection and restoration of ecological balance. 29. As environmental governance through these bodies emerges, the obligation of the constitutional courts is even greater. Hitherto, the constitutional courts focused on decisions and actions taken by the executive or private persons impacting the environment and ecology because the scrutiny by regulators was felt to be insufficient. Their judgment, review, and consideration did not inspire confidence and therefore, the Court took up the issue and would decide the case. In this process, a large number of decisions rendered by this Court on sensitive environmental, forest, and ecological matters constitute the critical mass of our environmental jurisprudence. This Court would continue to exercise judicial review, particularly in env ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of one another. The specific grievance of the petitioner is that the data supplied by the Union includes even the items contemplated under clause 11. We have before us the performance and audit report conducted on the working of the Review Committee.22 In the report of the Comptroller and Auditor General of India,23 it was thus observed: "d) Clause 3(4) of the Policy envisaged that the CPSEs which fail to meet the annual procurement target from MSEs shall substantiate with reasons to the Review Committee headed by Secretary, Ministry of MSME. A scrutiny of the minutes of the Review Committee meetings revealed that none of the CPSEs which had failed to achieve the procurement targets had furnished reasons to the Review Committee". 28. We are of the opinion that the Review Committee, specifically entrusted with this duty, should resolve this issue. Under sub-clause (2) of clause 12, the Review Committee is specifically entrusted with the twin duties of (i) reviewing the 358 items exclusively reserved for MSEs and (ii) considering the request of the ministries, departments and public sector undertakings for exemption from 25% on a case-to-case basis. The Review Committee also ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m licence plate business will have to be provided duly attested by a chartered accountant/any bank to be attached in support of fulfilment of this condition". Rejecting the submission that the said clause violated articles 14 and 19 of the Constitution, the Court thus observed: "35...The insistence of the State to search for an experienced manufacturer with sound financial and technical capacity cannot be misunderstood. The relevant terms and conditions quoted above are so formulated to enable the State to adjudge the capability of a particular tenderer who can provide a fail-safe and sustainable delivery capacity. 38...Unless the action of tendering authority is found to be malicious and a misuse of its statutory powers, tender conditions are unassailable. On intensive examination of tender conditions, we do not find that they violate the equality clause under Article 14 or encroach on fundamental rights of the class of intending tenderers under Article 19 of the Constitution. 43. ...Article 14 of the Constitution prohibits the Government from arbitrarily choosing a contractor at its will and pleasure. It has to act reasonably, fairly and in public interest in awarding con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icy for Micro and Small Enterprises. Under the provision of Section-13 of new Public Procurement Policy for Micro and Small Enterprises (MSEs), a Grievance Cell is hereby constituted for redressing difficulties of MSEs under Public Procurement Policy for Micro and ' Small enterprises. 2. A Grievance Cell will be functional under the supervision of Director (MA), O/o DC(MSME), looking after (MA) with following contact details: i) Name of Grievance Cell In-charge Shri U.C. Shukla ii) Telephone No. +91-11-23063363 iii) Fax No. +91-11-23060536 iv) E-mail [email protected] 3. The Grievance Cell will be for redressing grievances of MSEs in Government procurement. This cell shall take up issues related to Government procurement raised by Micro and Small Enterprises with Department or Agencies concerned, including imposition of unreasonable conditions in tenders floated by Government Departments or Agencies that put Micro and Small Enterprises at a disadvantage." 35. The Grievance Cell is specifically mandated to take up issues relating to the imposition of unreasonable conditions in tenders floated by Government departments or agencies that put MSEs at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in two years, the criteria for average turnover in the last 5 years was kept as Rs. 15 crores although the amount of work to be executed in one year was only Rs.7.5 crores. The above resulted in prequalification of a single firm. ii) One organization for purchase of Computer hardware kept the criteria for financial annual turnover of Rs. 100 crores although the value of purchase was less than Rs. 10 crores, resulting in disqualification of reputed computer firms. iii) In one case of purchase of Computer hardware, the prequalification criteria stipulated was that the firms should have made profit in the last two years and should possess ISO Certification. It resulted in disqualification of reputed vendors including a PSU. iv) In a work for supply and installation of A.C. Plant, retendering was resorted to with diluted prequalification criteria without adequate justification, to favour selection of a particular firm." 37. We had indicated to Mr. Giri, that the purpose and object of entertaining this Writ Petition under Article 32 of the Constitution is not so much to enquire into the individual grievance of the petitioner than to examine the nature of the rights created ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r order.
40. With these directions the writ petition is disposed of. There shall be no order as to costs.
FOOT NOTE
1 Hereinafter referred to as the "MSE(s)".
2 Hereinafter referred to as 'NIT'.
3 Hereinafter referred to as the "MSMED Act/Act".
4 Hereinafter referred to as the "Procurement Order 2012"
5 CWP No. 2268/2017.
6 SLP (C) No. 14026/2017.
7 Notification dated 23.03.2012 as modified by the notification dated 09.11.2018.
8 Hereinafter referred to as the "Act".
9 '2024 Theme: MSMEs and the SDGs' (United Nations) X X X X Extracts X X X X X X X X Extracts X X X X
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