Procurement preference policy under MSMED law binds public authorities, while tender turnover clauses must not defeat statutory preference.

A procurement preference policy notified under the MSMED framework can have the force of law and bind public authorities to implement the mandated preference for micro and small enterprises. The court distinguished that this creates a statutory public duty, not a personal enforceable right in favour of any individual enterprise, while leaving the policy open to judicial review. It also held that minimum turnover conditions in tender notices are not inherently unconstitutional, but they must not frustrate the statutory procurement mandate; unreasonable clauses require scrutiny by the designated grievance and review mechanisms, with policy guidance to set appropriate limits.

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Issues: (i) Whether the Procurement Preference Policy, 2012 mandated procurement of 25% of goods and services from micro and small enterprises and whether the policy had the force of law; (ii) Whether mandatory minimum turnover clauses in NITs were violative of Articles 14 and 19 of the Constitution and the MSMED framework.

Issue (i): Whether the Procurement Preference Policy, 2012 mandated procurement of 25% of goods and services from micro and small enterprises and whether the policy had the force of law.

Analysis: The statutory scheme under Section 11 of the Micro, Small and Medium Enterprises Development Act, 2006 authorises preference policies for procurement from micro and small enterprises. The Procurement Preference Policy, 2012 was notified in exercise of that power and was held to embody a mandatory public procurement framework for the concerned authorities. The Court distinguished between an enforceable individual entitlement and the statutory obligation of public authorities, holding that the policy binds the authorities and is subject to judicial review. It further held that the Review Committee and Grievance Cell are relevant institutional mechanisms for implementation and monitoring.

Conclusion: The Policy has the force of law, and public authorities are under a statutory obligation to implement the procurement mandate, though an individual micro or small enterprise does not have a personal enforceable right to insist on procurement in its favour.

Issue (ii): Whether mandatory minimum turnover clauses in NITs were violative of Articles 14 and 19 of the Constitution and the MSMED framework.

Analysis: Minimum turnover criteria may ordinarily be used to assess bidder capacity and capability, but such criteria cannot be allowed to defeat the procurement mandate under the MSMED policy framework. The Court held that while turnover-based eligibility conditions are not inherently unconstitutional, they require examination in the context of the statutory preference policy for micro and small enterprises. The Grievance Cell was identified as the appropriate body to examine unreasonable tender conditions and to formulate suitable policy guidance, and the Review Committee was directed to consider the limits of such clauses.

Conclusion: The turnover clauses were not struck down outright, but the respondents were directed to examine and declare appropriate limits and issue policy guidelines so that such clauses do not undermine the MSMED procurement policy.

Final Conclusion: The writ petition was disposed of with directions to the respondents and the designated statutory bodies to clarify the operation of the procurement mandate and to formulate guidance on minimum turnover conditions, thereby affirming the statutory procurement framework while leaving implementation and policy calibration to the competent authorities.

Ratio Decidendi: A procurement preference policy notified under Section 11 of the MSMED Act can have the force of law and impose enforceable public duties, and tender conditions for bidder eligibility cannot be applied in a manner that frustrates the statutory procurement mandate for micro and small enterprises.

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