Procurement Order 2012 Held to Have Force of Law; Review Committee and Grievance Cell Directed to Frame Guidelines on Minimum Turnover Clauses

A Bench of Justice Pamidighantam Sri Narasimha and Justice Sandeep Mehta heard a writ petition by a micro enterprise challenging disqualification from government tenders on account of mandatory minimum turnover conditions and seeking enforcement of the Public Procurement Policy for Micro and Small Enterprises (MSEs) Order, 2012. The petition raised two questions: whether the Procurement Order 2012 created an enforceable obligation for procurement of 25% from MSEs, and whether mandatory turnover clauses in Notices Inviting Tenders were violative of Articles 14 and 19 or the Procurement Policy.

The Court summarised that the Procurement Order 2012 was issued under Section 11 of the MSMED Act and "has the force of law and is enforceable." It held that while the Act and the Procurement Order did not create a standalone enforceable right for an individual MSE, they created statutorily recognised duties on ministries, departments and public sector undertakings that were amenable to judicial review. The Bench directed institutional bodies under the Act — in particular the Review Committee constituted under clause 12 and the Grievance Cell under clause 13 of the Policy — to examine compliance and to address the effect of minimum turnover clauses. The Court mandated that the Review Committee decide whether the 25% procurement obligation under clause 3 was to be computed independently of the 358 items reserved under clause 11 and to upload its decision within 60 days. The Court further directed the Review Committee and the Grievance Cell to "examine limits of minimum turnover clauses and issue necessary and appropriate policy guidelines" within 60 days.

The Court, in its reasoning, observed: “Having considered the provisions of the Act and the Procurement Order 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’. 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.”

Background

The petitioners, LifeCare Innovations Pvt. Ltd. (a Micro Enterprise) and its founder, challenged recurrent disqualification from public procurement for their specialised drug Liposomal Amphotericin B (LAmB) on grounds that NITs imposed mandatory minimum turnover thresholds that smaller specialised firms could not meet. The company contended that turnover conditions were arbitrary, bore no rational nexus to manufacturing capability or drug efficacy, and subverted the Procurement Order 2012’s objective that ministries procure a set percentage from MSEs. The petitioners’ earlier writ before the Punjab & Haryana High Court was dismissed in 2017 and a Special Leave Petition remained pending.

Senior counsel for the petitioners argued violation of Articles 14 and 19 and reliance on the Procurement Order; the Additional Solicitor General for the Union countered that procurement choices were contractual, necessary to assess supplier capability for drugs, and that statistics demonstrated compliance with the Policy. The Court reviewed the statutory scheme under the MSMED Act, the 2012 Procurement Order and related institutional structures — National Board for MSMEs, Advisory Committee, Facilitation Council, Review Committee and Grievance Cell — emphasising that these bodies must function effectively to realise policy objectives.

The Bench considered Comptroller and Auditor General findings that implementation had lacunae, quoting the audit: “none of the CPSEs which had failed to achieve the procurement targets had furnished reasons to the Review Committee.” It also recorded the CAG’s criticism of the Grievance Cell’s functioning, noting that though 2,253 grievances had been received, “only three of these grievances were routed through Grievance Cell,” and recommended better maintenance and outcome reporting.

On those facts the Court disposed the petition by (a) declaring the Procurement Order 2012 to have the force of law; (b) holding that individual MSEs did not acquire a standalone enforceable right to procurement but that public authorities bore enforceable duties under the Policy; (c) directing the Review Committee to clarify whether the 25% obligation was independent of the 358 reserved items and to take action within 60 days; and (d) directing the Review Committee and Grievance Cell to examine and issue guidelines specifying limits on minimum turnover clauses within 60 days. The writ petition was disposed of with no costs.

Case No.: Writ Petition (C) No. 1301 of 2021 (2025 INSC 269) Case Title: LifeCare Innovations Pvt. Ltd. & Anr. v. Union of India & Ors. Appearances: For the Petitioner(s): Mr. V. Giri, Senior Counsel For the Respondent(s): Mr. K. M. Natraj, Additional Solicitor General; Ms. Vanshaja Shukla, Advocate