AI Drafter 
TaxTMI 
TaxTMI 
2025 (3) TMI 372
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....ment Order 2012. 1.1 Having examined the 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 addr....
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....he turnover of the Enterprise is also bound to be 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 petition^5 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 ....
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...., department or instrumentality to procure 25% of their supplies 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 questio....
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....country's workforce, contribute 30% to India's GDP,^12 and account for around 45% of India's total exports^13. The Indian MSME sector is projected to grow to $1 trillion by 2028^14. Moreover, MSMEs play a crucial role in promoting rural development, women's employment, and inclusive growth. 19.5% of total MSMEs^15 and 70% of informal micro-enterprises are owned by women^16. 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 a....
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....ilitating the promotion and development and enhancing the competitiveness of small and medium enterprises and seeks to- (a) provide for statutory 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 Mi....
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....ed for exclusive purchase from them. This will help in promotion and growth of Micro and Small Enterprises, including Khadi and village industries, which play a critical role in fostering inclusive growth in the country. Cl. 12. Review Committee. - (1) A Review 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 pro....
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....sposals), Department of Commerce, Ministry of Commerce and Industry : Member (v) Additional Secretary and Development Commissioner (MSME) : Member Secretary The Committee will undertake the following functions: (i) Consider the requests of the Central Ministries/Departments/PSUs for exemption, on a case to case basis, from the 20% target; (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....
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....s that the mandate of the grievance cell shall include redressal of "imposition of unreasonable conditions in tenders floated by the Government Departments or agencies that put Micro and Small Enterprises at a disadvantage". 21. Having considered the provisions of the Act and the MSE Procurement Preference Policy, 2012, we are of the opinion that there is no mandatory minimum procurement 'right' of an individual MSE. However, 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 th....
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....nmental rule of law and the need to strengthen the statutory and administrative bodies concerning forest. The relevant portion of the order is extracted below: "27. The above referred bodies, authorities, regulators, and officers are constituted with persons having expertise in the field. They have the requisite knowledge to take appropriate decisions about contentious issues of the environment, forests, and wildlife, and also to ensure 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 ....
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.... year 2021-2022, 37.13% for the year 2022-2023, and 43.71% for the year 2023-2024, it is not clear as to whether the said procurement includes procurement of some of the 358 items that have been reserved exclusively for MSEs under clause 11 of the Procurement Policy. A holistic reading of the procurement policy, incorporating clauses 3, mandating 25 percent from MSEs and clause 11 reserving 358 items for procurement from MSEs, gives us an impression that these mandates are independent 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 fur....
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....Sugar Works Ltd. v. Delhi Administration (2001) 3 SCC 635; M.R.F. Ltd. v. Inspector Kerala Govt., (1998) 8 SCC 227 this Court had an occasion to examine a tender clause which read, "The tenderers/bidders of the joint-venture partners together must have had a minimum annual turnover equivalent to INR 30 crores in the immediately preceding last year. At least 25% of this turnover must be from the licence plate business. Certificate confirming and the certification of this minimum 25% turnover being from 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....
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....he Procurement Preference Policy 2012. 34. While referring to the Procurement Order 2012, we have already indicated that under Clause 13, the Ministry is to set upon the 'Grievance Cell'. By order dated 18.11.2013, the central government constituted the Grievance Cell, the composition as well as the function of the Grievance Cell are evident from the office order extracted herein below; "OFFICE ORDER 18.11.2013 Subject: Constitution of Grievance Cell for redressing difficulties of MSEs under Public Procurement Policy 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] ....
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..... Recommendation: DC (MSME) should maintain information on final outcome of complaints/grievances". ( emphasis supplied ) 36. Mr. Giri also brought to our notice circular No. 14/4/07 dated 26.04.2007 issued by the CVC referring to certain irregularities or lapses. This circular may not be in the context of the difficulties faced by MSEs but is indicative of the general practices adopted by procuring agencies, which militate against a healthy procurement policy. The relevant portion of the circular issued by CVC is as follows: - "3. i) For a work with an estimated cost of Rs.15 crores to be completed 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 stipu....
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....erence Policy 2012 to examine the issue of mandatory procurement of 25 per cent of goods and services by the Government, and its instrumentalities from MSEs under clause 3 of the Policy in the context of clause 11 providing for reservation of specific items for procurement and take such action as is necessary for effective implementation of the Policy within a period of 60 days from the date of our order; and (e) the respondents, including the Review Committee and in particular the Grievance Cell, shall examine and declare limits of the minimum turnover clauses with respect to MSEs and issue appropriate policy guidelines within a period of 60 days from the date of our 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 The....