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of <h1>Public Procurement Policy for MSEs has force of law under MSMED Act Section 11, government must procure 25% from MSEs</h1> <h3>LIFECARE INNOVATIONS PVT. LTD. & ANR. Versus UNION OF INDIA & ORS.</h3> LIFECARE INNOVATIONS PVT. LTD. & ANR. Versus UNION OF INDIA & ORS. - 2025 INSC 269 ISSUES PRESENTED and CONSIDEREDThe judgment addresses two primary legal questions:1. Whether the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act), along with the Procurement Preference Policy, 2012, mandates the procurement of 25% of goods and services by the government and its instrumentalities from Micro and Small Enterprises (MSEs).2. Whether the prescription of mandatory minimum turnover clauses in Notices Inviting Tenders (NITs) violates Articles 14 and 19 of the Constitution, the provisions of the MSMED Act, and the Procurement Preference Policy, 2012.ISSUE-WISE DETAILED ANALYSIS1. Mandate for Procurement from MSEsRelevant Legal Framework and Precedents: The MSMED Act, 2006, particularly Section 11, empowers the Central and State Governments to notify preference policies for the procurement of goods and services from MSEs. The Public Procurement Policy for Micro and Small Enterprises (MSEs) Order 2012 was notified under this provision, mandating a minimum of 25% procurement from MSEs.Court's Interpretation and Reasoning: The Court recognized that while there is no enforceable right for an individual MSE to demand procurement, the Procurement Preference Policy, 2012, has the force of law, encapsulating a mandate and specific purpose. The statutory bodies created under the Act and the Policy have enforceable duties, and their functioning is subject to judicial review.Key Evidence and Findings: The Court examined the legal regime concerning the promotion and development of MSEs and the establishment of various statutory and administrative bodies under the Act and the Procurement Order 2012.Application of Law to Facts: The Court concluded that the Procurement Order 2012 mandates procurement of 25% from MSEs as a statutory duty of the bodies constituted under the Act and the Policy. The Court emphasized the importance of ensuring the effective functioning of these bodies to achieve the legislative purpose.Treatment of Competing Arguments: The Court noted the statistics provided by the Union of India demonstrating compliance with the policy requirement of procuring from MSEs. However, it was unclear whether this included procurement of items reserved exclusively for MSEs. The Court directed the Review Committee to examine this issue.Conclusions: The Court directed the respondents, particularly the Review Committee, to examine the issue of mandatory procurement of 25% of goods and services by the Government from MSEs and take necessary action for compliance with the Procurement Order 2012.2. Legality of Minimum Turnover ClausesRelevant Legal Framework and Precedents: Articles 14 and 19 of the Constitution ensure equality and freedom of trade and business. The Court referred to precedents where tender conditions were examined for arbitrariness and reasonableness.Court's Interpretation and Reasoning: The Court acknowledged that while the government has the latitude to prescribe eligibility requirements, such as minimum turnover clauses, these should not undermine the Procurement Order 2012. The Court emphasized that the Procurement Preference Policy 2012 is a statutory obligation, and minimum turnover clauses should not override it.Key Evidence and Findings: The Court considered the Grievance Cell's mandate to address unreasonable conditions in tenders that disadvantage MSEs. The Comptroller and Auditor General of India's report highlighted deficiencies in the Grievance Cell's functioning.Application of Law to Facts: The Court directed the Grievance Cell to examine the limits of minimum turnover clauses and issue appropriate policy guidelines. The Court stressed that these clauses should not defeat the purpose of the Procurement Order 2012.Treatment of Competing Arguments: The Court noted the government's position that turnover criteria are necessary to assess the capability of suppliers, especially for critical procurements. However, the Court emphasized the need to balance these criteria with the statutory obligations under the Procurement Order 2012.Conclusions: The Court directed the Grievance Cell to examine and declare limits of minimum turnover clauses concerning MSEs and issue policy guidelines within 60 days.SIGNIFICANT HOLDINGSCore Principles Established: The judgment established that the Procurement Preference Policy, 2012, has the force of law and mandates procurement of 25% from MSEs as a statutory duty. It also highlighted the importance of ensuring the effective functioning of statutory and administrative bodies under the Act and the Policy.Final Determinations on Each Issue:(a) The Public Procurement Policy for MSEs Order 2012 has the force of law and encapsulates the purpose and object of the Act.(b) There is no mandatory minimum procurement right for an individual MSE, but there is a statutorily recognized obligation on authorities to implement the mandate, subject to judicial review.(c) Judicial review will ensure the proper constitution and effective functioning of the relevant authorities and bodies.(d) The Review Committee is directed to examine the issue of mandatory procurement of 25% from MSEs and take necessary action for effective implementation within 60 days.(e) The Grievance Cell is directed to examine the limits of minimum turnover clauses and issue appropriate policy guidelines within 60 days.
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