Summary
In an Article 32 petition by a micro enterprise excluded from drug tenders by minimum turnover clauses, the Supreme Court held that the Public Procurement Policy for Micro and Small Enterprises Order 2012, issued under Section 11 of the MSMED Act, has the force of law. It creates no enforceable right for an individual MSE but imposes duties on the authorities that are subject to judicial review; minimum turnover clauses cannot override the Order. The Review Committee and Grievance Cell were directed to act within 60 days.
Issues
- Whether the MSMED Act, 2006 and the Procurement Order 2012 mandate procurement of 25 per cent of goods and services by the Government and its instrumentalities from Micro and Small Enterprises, and whether an individual MSE has an enforceable right to it.
- Whether mandatory minimum turnover clauses in Notices Inviting Tenders violate Articles 14 and 19 of the Constitution, the MSMED Act and the Procurement Order 2012.
- What the scope of judicial review is over the bodies created to implement the MSMED Act and the Procurement Order 2012.
Provisions considered
- Section 11, Micro, Small and Medium Enterprises Development Act, 2006Empowers the Central or State Government to notify procurement preference policies for goods and services of micro and small enterprises; the Procurement Order 2012, made under it, was held to have statutory foundation and the force of law. (¶¶ 13, 14, 15, 21, 33, 39)
- Sections 3, 5, 6, 7, 9, 20 and 21, Micro, Small and Medium Enterprises Development Act, 2006These establish the National Board, Advisory Committee and Facilitation Council and provide for promotion measures; the Court held these bodies accountable and their functioning subject to judicial review. (¶¶ 13, 19, 25, 39)
- Clause 3, Public Procurement Policy for Micro and Small Enterprises (MSEs) Order, 2012Requires annual procurement goals and makes the overall minimum procurement from MSEs mandatory from 1 April 2015 (20 per cent, raised to 25 per cent in 2018), with defaulting bodies answerable to the Review Committee; held to be a statutory duty of the authorities, not an individual MSE's right. (¶¶ 16, 17, 20, 21, 29)
- Clauses 11 and 12, Public Procurement Policy for Micro and Small Enterprises (MSEs) Order, 2012Clause 11 reserves 358 items for exclusive purchase from MSEs and Clause 12 sets up the Review Committee to review that list, consider exemptions and monitor achievements; the Court read the 25 per cent mandate and the reservation as appearing independent and directed the Review Committee to decide the point. (¶¶ 16, 18, 27, 28, 29)
- Clause 13, Public Procurement Policy for Micro and Small Enterprises (MSEs) Order, 2012The Grievance Cell must take up unreasonable tender conditions that disadvantage MSEs, which includes minimum turnover clauses; it was directed to examine their limits and issue guidelines. (¶¶ 16, 20, 34, 35, 38)
- Articles 14 and 19, Constitution of IndiaIn ordinary procurement the State has latitude to set capacity-based eligibility such as turnover, and no one has a fundamental right to contract with Government; but for MSE procurement, the statutory policy means turnover clauses must not defeat the Order. (¶¶ 31, 32, 33)
Held
- The Procurement Order 2012 has the force of law because it is made under Section 11 of the MSMED Act and embodies a mandate and specific purpose; there is no mandatory minimum procurement right vested in an individual MSE, but the 25 per cent procurement requirement under Clause 3 is a statutory duty of the authorities and bodies under the Act and the Order. (¶¶ 21, 39)
- When statutes or policies create bodies to implement them, judicial review should primarily ensure that those bodies are properly constituted and function effectively and efficiently, leaving policy and decisions to them; this goes beyond issuing mandamus to perform a duty, and is not a doctrine of alternative remedy or judicial restraint. (¶¶ 22, 23, 24, 25, 39)
- As the Union's procurement data did not show whether purchases of the 358 reserved items were counted towards the 25 per cent target, and the CAG had found that defaulting CPSEs gave no reasons to the Review Committee, the Review Committee, being the expert body, must decide whether the 25 per cent mandate is independent of the reserved items and ensure compliance. (¶¶ 26, 27, 28, 29)
- Tender conditions on a bidder's capacity and capability, including turnover, are ordinarily within the executive's latitude and do not by themselves violate Articles 14 and 19 unless malicious or a misuse of power (following Association of Registration Plates). (¶¶ 31, 32)
- Procurement from MSEs stands on a different footing because of the statutory preference policy; while minimum turnover criteria may be prescribed where public safety, health or critical security equipment are involved, they cannot undermine or override the Procurement Order 2012, and clear guidelines are needed. (¶ 33)
- The Grievance Cell, mandated to redress unreasonable tender conditions disadvantaging MSEs, must examine the limits of minimum turnover clauses and issue policy guidelines; the petition was entertained to declare the nature of rights and remedies under the Order rather than to decide the petitioner's individual grievance. (¶¶ 35, 37, 38)
Result
Writ petition disposed of with declarations that the Procurement Order 2012 has the force of law and imposes judicially reviewable duties; the Review Committee directed within 60 days to decide whether the 25 per cent mandate is independent of the 358 reserved items and act accordingly, and the Review Committee and Grievance Cell directed within 60 days to set limits on minimum turnover clauses for MSEs and issue guidelines; no costs.