Safiya Malik

The Gauhati High Court dismissed a writ petition challenging the disqualification of a micro and small enterprise (MSE) in a technical bid under a public tender for "Composite Works on Open Domestic Competitive Bidding Basis." The petitioner argued that the disqualification contravened the Public Procurement Policy (PPP-2012) for MSEs, issued by the Ministry of Micro, Small, and Medium Enterprises (MSME), Government of India.

The petitioner, M/s Northeast Engineering and Construction, represented by its authorized signatory, Rupam Hazarika, contested the rejection of its technical bid on the grounds that it failed to submit an Earnest Money Deposit (EMD). The petitioner argued that as an MSE, it was exempt from such a requirement under PPP-2012.

Represented by advocates R. Choudhury, N. Gautam, and K.N. Choudhury, the petitioner submitted that PPP-2012 mandates exemptions for MSEs from submitting EMDs for participating in tender processes. Counsel asserted that this exemption was integral to promoting and supporting MSEs as outlined in the MSMED Act, 2006.

The petitioner also pointed to previous tenders issued by the respondents, where MSEs had been granted EMD exemptions. It was argued that the removal of this exemption in the current tender, issued on April 16, 2024, was arbitrary and violative of established policy.

The respondents, represented by advocates S. Mitra, D. Senapati, and others, argued that the PPP-2012 exemptions do not extend to work contracts. They referred to a clarification issued by the Ministry of MSME on August 31, 2023, which explicitly excluded MSEs from receiving benefits under PPP-2012 in relation to work contracts.

The respondents further stated that the tender had already been awarded to an eligible bidder, Bridge and Roof Company Limited, which had commenced the project. It was submitted that the petitioner’s failure to implead the successful bidder rendered the writ petition defective due to non-joinder of necessary parties.

Justice Michael Zothankhuma considered the core issue as whether the PPP-2012 exemption for MSEs concerning EMD applies to work contracts. The court noted that the petitioner's arguments relied on a broad interpretation of PPP-2012, while the respondents presented specific clarifications and judicial precedents limiting its scope.

The court referred to several judgments addressing the applicability of PPP-2012:

1. Delhi High Court (2015): In M/s Shree Gee Enterprises v. Union of India, the court recorded that the PPP-2012 applies only to goods produced and services rendered by MSEs, explicitly excluding work contracts.

2. Bombay High Court (2017): In Sterling and Wilson Pvt. Ltd. v. Union of India, the court observed: “The provisions of the Public Procurement Policy 2012 are meant for the procurement of goods produced and services provided by MSEs, and not for work contracts which involve a combination of goods, services, and labor.”

3. Allahabad High Court (2017): The court, in M/s Rahul Singh v. Union of India, recorded: “Work contracts are distinct from goods or service contracts and are not covered under PPP-2012.”

4. Andhra Pradesh High Court (2022): In Rashtriya Ispat Nigam Limited v. Union of India, it was stated that work contracts, being composite in nature, fall outside the scope of PPP-2012.

The court recorded that the tender in question explicitly excluded the EMD exemption for MSEs. Justice Zothankhuma stated: “Clause 16.8 of the NIT dated 16.04.2024 explicitly struck out the exemption previously granted to MSEs under PPP-2012.”

The court also referred to the Supreme Court's ruling in Afcons Infrastructure Ltd. v. Nagpur Metro Rail Corporation Ltd. (2016), which held that tendering authorities have the discretion to design tender conditions based on their specific requirements. It was noted that judicial interference in such matters is limited to instances of mala fide, perversity, or arbitrariness.

The court further observed: “The petitioner participated in the tender without raising any objections to the exclusion of the exemption clause for MSEs. Such participation precludes the petitioner from challenging the process after being disqualified.”

The court dismissed the petition, finding no merit in the challenge. Justice Zothankhuma recorded: “On considering the PPP-2012 and the clarification given by the Government of India vide letter dated 31.08.2023, coupled with the decision of the various High Courts, this Court holds that work contracts do not come within the purview of PPP-2012.”

It was further stated: “The petitioner cannot insist that the tender document should have incorporated an exemption clause for MSEs. The tender conditions are determined by the issuing authority, and this court finds no arbitrariness or mala fide in the present case.”

The court noted that the petitioner’s failure to implead the successful bidder also weakened its case, referencing the principle laid down by the Supreme Court that all affected parties must be made respondents in such disputes.

Case Title: M/s Northeast Engineering and Construction v. Union of India and Another
Case Number: WP(C)/4448/2024
Bench: Justice Michael Zothankhuma

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