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Issues: (i) Whether the Micro, Small and Medium Enterprises Development Act, 2006 and the Public Procurement Policy for Micro and Small Enterprises apply to a composite EPC tender amounting to a works contract; (ii) Whether the decision to permit the L-2 MSME bidder to match the L-1 price and award the tender to it was legally sustainable.
Issue (i): Whether the Micro, Small and Medium Enterprises Development Act, 2006 and the Public Procurement Policy for Micro and Small Enterprises apply to a composite EPC tender amounting to a works contract.
Analysis: The statutory scheme under Section 11 of the Micro, Small and Medium Enterprises Development Act, 2006 and the procurement policy was confined to procurement of goods produced and services rendered by micro and small enterprises. The tender in question required design, engineering, manufacture, procurement, supply, erection, commissioning and handing over of the fire water spray system, and was therefore a composite contract involving both supply and installation. Such a contract was held to be a works contract, not a contract for sale of goods or services simpliciter. On that construction, the policy benefits could not be extended to the bidder claiming MSME preference.
Conclusion: The Act and the procurement policy were held inapplicable to the tender as a works contract, and the MSME preference clause could not validly operate in its favour.
Issue (ii): Whether the decision to permit the L-2 MSME bidder to match the L-1 price and award the tender to it was legally sustainable.
Analysis: Since the policy did not apply to the nature of the contract, the respondent could not rely on the tender clause enabling price matching by an MSME bidder. The award of the contract to the L-2 bidder was therefore based on an impermissible extension of statutory preference, and participation in the tender did not bar challenge to an action that was contrary to law. Judicial review was held available because the decision was arbitrary and illegal.
Conclusion: The decision to award the tender to the L-2 MSME bidder was quashed as arbitrary and illegal.
Final Conclusion: The writ petition succeeded in part by invalidating the award of the tender to the MSME bidder, while leaving the tender process otherwise intact for further lawful consideration by the purchaser.
Ratio Decidendi: Statutory purchase preference for micro and small enterprises under the MSME framework applies only to procurement of goods and services simpliciter and not to a composite works contract; any tender award founded on such inapplicable preference is liable to be struck down as arbitrary and illegal.
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