‘No relief where private interest overrides public cause’
Mohinder Verma
JAMMU, Aug 14: The High Court of Jammu & Kashmir and Ladakh has ruled that the Public Procurement Policy for Micro and Small Enterprises (MSEs) under Micro Small and Medium Enterprises Development (MSMED) Act, 2006 does not apply to composite Supply, Installation and Testing (SIT) contracts, holding that such tenders are indivisible and governed by project-specific procurement guidelines.
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Dismissing a writ petition filed by three local firms—-Zain Electricals, Northern Transformers and North Sun Enterprises, Justice Wasim Sadiq Nargal observed that the MSME Policy was intended for standalone procurement of goods and services and not for work contracts integrating supply with installation and commissioning.
The petitioners had alleged that the tenders floated by Kashmir Power Distribution Corporation Limited (KPDCL) violated Section 11 of the MSMED Act and the Public Procurement Policy for MSEs, which requires at least 25% of total annual procurement by Government agencies to be from MSEs and exclusive procurement of 358 reserved items from MSEs.
They argued that the supply portion of the SIT tenders should have been reserved for MSEs and claimed the respondents failed to submit the procurement details.
However, the Government of the J&K UT and KPDCL countered that the petitioners did not participate in the tender process, thus lacking locus standi to challenge it. Further, it was submitted that the contracts were composite in nature integrating supply, installation and testing—which could not be split for MSME preference.
“Projects were part of Centrally Sponsored Schemes such as the Revamped Distribution Sector Scheme (RDSS), governed by scheme-specific guidelines that did not mandate MSME reservations for SIT contracts”, they added.
After hearing counsels for both the sides, Justice Wasim Sadiq Nargal underscored that Section 11 of the MSMED Act empowers the Government to frame policies for procurement from MSEs, culminating in SO 581(E) dated 23.03.2012. However, both the statute and the notification focus on direct procurement not on integrated work packages.
Referring to Supreme Court rulings in BSNL Versus Union of India and Kone Elevator India Pvt Ltd Versus State of Tamil Nadu, the bench reiterated that composite contracts cannot be artificially split to apply procurement preferences. “SIT contracts are indivisible, with the supply of goods intrinsically linked to installation and testing, making bifurcation legally impermissible,” the High Court said.
The High Court further relied on Ministry of MSME clarifications that exclude works contracts from the policy’s ambit unless tenders specifically call for discrete procurement from MSEs.
Addressing the petitioners’ claim under Clauses 3 and 11 of the 2012 policy, the High Court observed that these provisions require Government bodies to source 25% of their total annual procurement from MSEs and reserve 358 items exclusively for procurement from MSEs.
However, citing the Supreme Court’s decision in Lifecare Innovations Pvt Ltd Versus Union of India, the bench clarified that these obligations are institutional in nature, not tied to individual contracts. “In SIT projects, where goods supply is inseparable from installation and commissioning, the policy cannot be applied mechanically to each component”, the High Court added.
“The procurement obligation is systemic and compliance must be seen across the procuring entity’s annual procurement activities, not contract by contract,” the High Court held.
A decisive factor in the dismissal was the petitioners’ non-participation in the tender process. The High Court held that under established law as laid down in NHAI Versus Gwalior-Jhansi Expressway Ltd, only parties who participate in the tender or who can demonstrate illegal exclusion have standing to challenge it.
“The petitioners had neither bid for the tender nor shown that they were barred by discriminatory or mala fide conditions. A person who voluntarily stays away from the bidding process cannot subsequently assail it on perceived entitlement,” the judgment said.
The bench also echoed the Supreme Court’s caution against using judicial review to advance private commercial interests at the cost of public projects. “The power of judicial review will not be permitted to be invoked to protect private interest at the cost of public interest,” the High Court remarked, warning against interference that could delay critical infrastructure works.
Concluding that the respondents acted within the framework of relevant scheme-specific procurement rules and that there was no arbitrariness, illegality or mala fide, the High Court dismissed the writ petition along with connected applications.
The interim stay issued on November 13, 2024, was vacated, paving the way for KPDCL to proceed with the tender execution.
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