Jinchandra Enterprises vs. State Of Chhattisgarh

Held

The Court held that while Clause 3 of the Public Procurement Policy for MSEs Order, 2012, mandates a minimum of 20% annual procurement from MSMEs, this is a general directive and does not create an enforceable right for an individual MSME to claim reservation or preference in a particular tender. The Court noted that the jurisdiction in such matters is limited to ensuring the proper functioning of statutory authorities, and policy-making is left to the executive. No material was presented to show the State failed to meet its general procurement target for MSMEs. Prescribing eligibility conditions like turnover is within the tendering authority's discretion to ensure financial capacity for large projects. The Court found no arbitrariness or illegality in the tender conditions, which were uniformly applicable and rationally linked to the objective. Exemption from EMD is a concession, not an absolute right, and the petitioner did not demonstrate manifest arbitrariness in its denial. Therefore, no case for interference under Article 226 of the Constitution was made out. The impugned tender conditions were found not to suffer from illegality, arbitrariness, or violation of the Public Procurement Policy for MSEs Order, 2012.

Facts

The petitioner, Jinchandra Enterprises, a registered MSME unit manufacturing metal household articles and GST-registered, filed a writ petition challenging a tender notice issued by Respondent No. 2 (Director of Public Instructions). The petitioner contended that the tender notice violated the Public Procurement Policy for MSEs Order, 2012, by not reserving at least 20% procurement from MSMEs and by imposing a minimum turnover requirement of Rs. 936 lakhs over three preceding financial years, which they argued was arbitrary and excluded genuine small MSMEs. Furthermore, the petitioner claimed the requirement of a Rs. 93,00,000/- Earnest Money Deposit (EMD) without statutory exemption for MSMEs was illegal. The petitioner sought directions to modify the tender to include MSME procurement provisions, exempt them from turnover requirements and EMD, and ensure compliance with the Procurement Order 2012.

Key Issues

1. Whether the impugned tender notice, by failing to incorporate provisions for at least 25% procurement from MSME units and by imposing a minimum turnover requirement of Rs. 936 lakhs, violates the Public Procurement Policy for Micro and Small Enterprises (MSEs) Order, 2012, and the MSME Act, 2006? (Question of law and mixed fact and law, turning on the interpretation of the Public Procurement Policy for MSEs Order, 2012 and the MSME Act, 2006). 2. Whether the requirement of depositing an Earnest Money Deposit (EMD) of Rs. 93,00,000/- without granting statutory exemption to MSMEs is in violation of government notifications? (Question of law, turning on the interpretation of government notifications regarding EMD exemptions for MSMEs). Petitioner's arguments: The tender violates the mandatory provisions of the Public Procurement Policy for MSEs Order, 2012, which mandates at least 20% procurement from MSMEs, thereby frustrating the object of the MSME Act, 2006. The turnover requirement is arbitrary and discriminatory. The EMD requirement without statutory exemption for MSMEs is illegal. Reliance was placed on Life Care Innovations v. Union of India. Revenue/State's arguments: The tender process was conducted in accordance with applicable rules and guidelines. No statutory right of the petitioner was infringed. The minimum turnover requirement ensures financially sound bidders for large-scale contracts impacting public interest (PM Poshan Scheme). Such conditions are within the tendering authority's domain and not arbitrary. Reliance was placed on Tata Cellular v. Union of India and Michigan Rubber (India) Ltd. v. State of Karnataka. The Public Procurement Policy for MSEs Order, 2012, imposes a general obligation, not an enforceable individual right.