Jammu & Kashmir High Court – Srinagar Bench
Zain Electricals vs Union Territory Of Jammu & Kashmir on 12 August, 2025
WP(C) No.2631/2024 Page 1 of 28
2025:JKLHC-SGR:214
Serial No. 1
Supp. cause list
HIGH COURT OF JAMMU & KASHMIR AND LADAKH
AT SRINAGAR
...
WP(C) 2631/2024, CM(2014/2025)
CM(2690/2025) , CM(7135/2024)
CM(7583/2024)
Reserved on: 23.07.2025
Pronounced on: 12.08.2025
1. Zain Electricals, Industrial Estate, Sanat, Srinagar
through its proprietor Waseem Ahmad Khateeb
S/o Khawja Innayatullah Khateeb, R/o Rawalpora, Srinagar.
2. Northern Transformers,
Industrial Estate, Sanat Nagar, Srinagar through
its proprietor Nayeem Khan S/o Mohammad Hussain Khan
R/o 134-Bagat Barzulla, Srinagar
3. North Sun Enterprises
Industrial Estate, Barzulla Srinagar,
through its proprietor Mohammad Altaf
s/o Haji Ghulam Mohi-ud-din r/o Rawalpora, Srinagar
.........Petitioner(s)
Through: Mr. Azhar ul Amin, Sr. Adv. with
Mr. Hanan Hussain, Adv.
Versus
1. Union Territory of Jammu & Kashmir
through its Chief Secretary, Civil Sectt. Jammu/Srinagar .
2. Kashmir Power Distribution Corporation (KPDCL) Limited
through its Managing Director, Srinagar.
3. Chief Engineer Projects Kashmir, Kashmir Power Distribution Corporation
(KPDCL) Humhama Srinagar.
4. Chief Engineer Planning and Procurement wing,
Kashmir Power Distribution Corporation (KPDCL) Srinagar.
5. Ministry of Micro Small and Medium Enterprises,
Government of India, through Secretary,
Udyog Bhawan, Rafi Marg Marg, New Delhi,
6. Industries and Commerce Department,
Government of Jammu and Kashmir
through its Principal Secretary, Civil Secretariat, Srinagar/Jammu.
7. Finance Department, Government of Jammu and Kashmir
through its Principal Secretary, Civil Secretariat, Srinagar/Jammu.
.......Respondent(s)
Through: Mr. Faheem Nissar Shah, GA for respondent Nos.1 to 4
Mr. Nazir Ahmad, Adv. for Respondent No.5
Mr. Waseem Gul, GA for respondent No. 6
2 WP(C) No. 2631/2024
2025:JKLHC-SGR:214
CORAM:
HON'BLE MR. JUSTICE WASIM SADIQ NARGAL, JUDGE
JUDGMENT
1. Background:
The present petition challenges the issuance of tenders by the
respondents pertaining to various projects involving the Supply,
Installation and Testing (SIT) of goods and services. It is contended
that the respondents have failed to adhere to the provisions of the
Public Procurement Policy specifically designed for Micro and Small
Enterprises (MSEs). This non-compliance as per the petitioner is in
direct violation of the mandatory requirements stipulated under Section
11 of the Micro Small and Medium Enterprises Development
(MSMED) Act, 2006.The MSMED Act, enacted with the objective of
promoting and facilitating the growth of Micro, Small, and Medium
Enterprises, mandates certain procurement preferences and reservations
for MSEs in government and public sector tenders. These provisions
are crucial to ensure the inclusion, participation and upliftment of
MSEs in public procurement processes.
2. Additionally it has been projected that the respondents have
disregarded the guidelines enshrined in the Government Order issued
vide SO 581(E) dated 23rd March 2012, which operationalizes the
Public Procurement Policy for MSEs. This Government Order
explicitly requires that a certain percentage of procurement must be
reserved for MSEs and that the relevant procedures be followed to give
these enterprises a fair opportunity to participate and compete in the
3 WP(C) No. 2631/2024
2025:JKLHC-SGR:214
tendering process. By failing to comply with these statutory and policy
requirements, the respondents have acted arbitrarily and contrary to the
principles of equity and fairness envisioned by the MSMED Act, 2006
and the accompanying Government Order. It is specific case of the
petitioner that such non-compliance not only undermines the legislative
intent behind protecting MSEs but also adversely affects the livelihood
and growth opportunities of these small-scale enterprises.
3. Therefore, the petitioner seeks appropriate direction from this Court to
ensure that the respondents strictly comply with the Public Procurement
Policy for Micro and Small Enterprises as mandated under the
MSMED Act, 2006, and the Government Order dated 23-03-2012,
thereby safeguarding the rights and interests of the Micro and Small
Enterprises sector.
ARGUMENTS OF PETITIONER
4. Mr. Azhar ul Amin, learned counsel appearing on behalf of the
petitioners has placed reliance upon Section 11 of the MSMED Act,
2006 which deals with the procurement preference policy and
authorizes the Central Government or the State Government to notify
the said preference policy in respect of the procurement of the goods
and services, produced and provided by the Micro and Small
Enterprises on the basis of the said statutory provision in conformity
with the Act, the said policy has been framed vide SO 581(E).
5. The learned counsel has also drawn the attention of this court that the
said policy is not confined to the procurement of goods, but also has
4 WP(C) No. 2631/2024
2025:JKLHC-SGR:214
been expanded to the services as well and with a view to fortify his
argument, he has placed reliance upon Section 11 of the said Act,
which provided that the preference policy has been expanded not only
to the goods, but also to the services produced and provided by the
Micro and Small Enterprises as well.
6. The, learned counsel has also drawn the attention of this court to the
said SO, which according to him makes it mandatory on the Central
Government for procurement from Micro and Small Enterprises from
the financial year 2012-2013 with the object of achieving an overall
procurement of minimum 20% which by virtue of amendment has been
increased to 25%, a total annual purchase of products and services
rendered by Micro and Small Enterprises in a period of three years.
7. Learned counsel further submits that the aforesaid SO has a statutory
backing and has been issued in conformity with Section 11 of the
aforesaid Act, and thus, the respondents were under legal obligation
qua the petitioners to mandatorily procure the aforesaid items from the
Micro and Small Enterprises i.e., petitioners herein and also specified
items as provided under Clause 11 of the said SO, wherein, 358 items
have been specified and reserved for exclusively to be purchased from
them. The aforesaid statutory compulsion is with a view to promote and
to see that the Micro and Small Enterprises are not put to a
disadvantageous position for their growth and thus, procuring the
aforesaid items from the general market and not from the Micro and
Small Enterprises defeats the very object of the said SO and is not
permissible under law.
5 WP(C) No. 2631/2024
2025:JKLHC-SGR:214
8. The learned counsel for the petitioner has also tried to draw distinction
between Clause 3 and Clause 11 of the aforesaid SO. Insofar as Clause
3 is concerned that relates to the mandatory procurement for Micro and
Small Enterprises for a current financial year with the object of
achieving overall procurement of minimum of 25% of the total
purchase of products produced and services rendered by Micro and
Small Enterprises and insofar as Clause 11 is concerned, the same
pertains to the reservation of the specified items for procurement to
enable wider dispersal of enterprises in the country, particularly in rural
areas, wherein, the Central Government and the Public Sector
undertaking have mandatorily to procure 358 items from Micro and
Small Enterprises which have been reserved for exclusive purchase
from them with the object to promote and growth of Micro and Small
Enterprises.
9. Thus, the action of the respondents in issuing the impugned tenders,
according to Mr. Azhar ul Amin, learned counsel is in direct conflict
with the aforesaid policy which has been framed in pursuant to Section
11 of the Micro Small and Medium Enterprises Development Act,
2006.
10. Lastly, the learned counsel referred to order dated 04.04.2025 in the
instant petition, wherein, the learned counsel appearing on behalf of the
respondents was directed to file an affidavit, thereby, specifying the
number of SITs which have been floated by the respondents in the
financial year 2024-25. He was also directed to furnish the percentage
of the tenders which has been allotted to MSMED in terms of SO 581
6 WP(C) No. 2631/2024
2025:JKLHC-SGR:214
(E) of 2012 in the financial year 2024-25 and the order passed by the
Coordinate Bench, has not been complied with.
11. Per Contra, it has been submitted by Mr. Faheem Nissar Shah, learned
GA that petitioners have not participated in the tender notice and thus,
they have no locus to file the instant petition.
12. Mr. Faheem Nissar Shah, learned GA has argued that the instant tender
is for the purposes of Supply, Installation and Testing and it involves
three components and the said tender cannot be bifurcated. His sole
emphasis was that had, the tender been floated for procurement of the
supply only, then the petitioner would have been justified in banking
their claim under the ambit of SO 581 (E), which has a statutory
backing in terms of Section 11 of the Micro, Small and Medium
Enterprises Development (MSMED) Act, 2006.
13. For facility of reference, Section 11 of the aforesaid Act, deals with the
procurement reference policy which provides as under:
11. For facilitating promotion and development of the
Micro, Small and Medium Enterprises, the Central
Government or the State Government may notify from
time to time preference policies in reference of the
procurement of goods and services produced and
provided by the Micro Small and Medium Enterprises by
its Ministries or Departments as the case may be or its
aided institution and public central enterprises.
14. From a bare perusal of the aforesaid statutory provision, much
emphasis has been laid upon that the said policy is for procurement
only. Thus, the scope of the said policy cannot be widened and made
applicable for the installation and testing.
7 WP(C) No. 2631/2024
2025:JKLHC-SGR:214
15. Mr. Faheem Nissar Shah, learned GA has further drawn the attention of
this court to the aforesaid SO which has been issued by the Ministry of
the Micro, Small and Medium Enterprises dated 23.03.2012 on which
the petitioner has based his claim reflects that the same has been issued
in exercise of the powers conferred in Section 11 of MSMED Act,
wherein, it has been defined that the Public Procurement Policy shall be
applicable to Micro and Small Enterprises registered with District
Industries Centers or Khadi and Village Industries Commission or
Khadi and Village Industries Board or Coir Board or National Small
Industries Corporation or Directorate of Handicrafts and Handloom or
any other body specified by the Ministry of Micro, Small and Medium
Enterprises.
16. Thus, a cumulative reading of the scheme of the Micro Small and
Medium Enterprises Development Act, 2006 and the aforesaid SO, it
can safely be concluded that the same is applicable only for
procurement purpose. However, the learned counsel submits that the
tender was a cumulative/joint tender and was applicable for Supply,
Installation and Testing, which by no stretch of imagination can be
bifurcated. He further submits that had the tender been issued only for
the purposes of supply, then perhaps the aforesaid SO would have been
made applicable and the Government in that eventuality was under a
legal obligation qua the petitioners to have procured the items from the
Micro, Small and Medium Enterprises.
17. Mr. Faheem Nissar Shah, learned GA has also drawn the attention of
this court to Clause 11 of the aforesaid SO which provides certain
8 WP(C) No. 2631/2024
2025:JKLHC-SGR:214
reservation of specific items for procurement to enable wider dispersal
of enterprises in the country, particularly in rural areas and it has been
made obligatory for the Central Government Ministries, Departments,
and Public Sector Undertakings (PSUs) to continue procuring 358
items from the Micro Small and Medium Enterprises which have been
reserved for exclusively to be purchased from them and the object is
laudable i.e., for promotion and growth of the Micro Small and
Medium Enterprises.
18. There is no denying the fact that the certain items have been reserved
for procurement from the Micro, Small and Medium Enterprises in
terms of Clause 11 of the said SO and there are generalized items as
well, which are required to be procured annually in terms of the
aforesaid SO, but both the Clauses are obligatory only with a view to
facilitate the procurement policy only.
19. It has also been urged by the learned counsel for the respondent, who
has filed the application for vacation of the interim order stating that
the MSMED Act, is not applicable to the impugned NIT which deals
with the Supply, Installation and Testing.
20. A specific stand has been taken by the respondents 1 to 4 that these
projects pertain to electrification, distribution, Sub-transmission in
Kupwara, Kanzalwan and Tulail which were approved under CSS or
DSS and the said projects are SIT i.e. Supply, Installation and Testing
type and are not limited to procurement of the material only.
21. It is a specific case projected by the learned counsel for the respondents
that projects being SIT in nature are outside the purview/domain of
9 WP(C) No. 2631/2024
2025:JKLHC-SGR:214
Public Procurement Policy for the Micro, Small and Medium
Enterprises order 2012, issued vide SO 581 (E) under Section 11 of
MSMED Act, with the sole object to promote the participation of
Micro and Small Enterprises in Government projects for procurements
only.
22. From a bare perusal of the scheme envisaged under the MSMED Act, it
requires the Central Government Ministries, Departments and Public
Sector Undertakings (PSUs) to mandatorily procure 25% of their
annual requirement from Micro and Small Enterprises, but the learned
GA has drawn a distinction that the said policy is applicable only for
the purposes of Public Procurement Process rather than a specific
condition for RDSS or any other centrally sponsored project.
23. He further argued that the procurement for the projects under CSS is
governed by the respective guidelines finalized, approved and reflected
in terms and conditions of the tender document which is the subject
matter of the instant petition, which leads to an irresistible conclusion,
that the scheme, guidelines, standard biding documents of RDSS does
not specify adherence to MSMED Act or Public Procurement Policy
for Micro and Small Enterprises, 2012.
24. Thus, a bare reading of Micro and Small Enterprises (MSEs) Order,
2012, which has a statutory backing under Section 11 of the Act, it lays
emphasis on annual procurement rather than a specific condition for
RDSS or any other centrally sponsored project which is for the
purposes of Supply Installation and Testing only.
10 WP(C) No. 2631/2024
2025:JKLHC-SGR:214
25. Lastly, he has submitted that the interim order passed by this court
dated 13.11.2024 by virtue of which all the three NITs have been
stayed is harshly working against the interest of the respondents and is
liable to be vacated.
26. Heard learned counsel for the parties and perused the record.
LEGAL ANALYSIS:
27. In light of the foregoing discussion and upon careful consideration of
the submissions and counter-submissions advanced by the learned
counsel for the parties, this Court is of the considered opinion that the
outcome of the present petition rests upon the determination of the
following issues:
i. Whether the Public Procurement Policy for Micro and Small
Enterprises (MSEs), issued vide S.O. 581(E) dated 23.03.2012,
framed under Section 11 of the MSMED Act, 2006, is
applicable to composite contracts involving Supply,
Installation, and Testing (SIT)?
ii. Whether Clause 3 and Clause 11 of the said Procurement
Policy impose a binding obligation on Government
departments and PSUs to procure all items including those
forming part of SIT projects exclusively from MSEs?
iii. Whether the petitioner, who did not participate in the tender
process, has the requisite locus standi to challenge the tender
notifications in question?
ISSUE No.i: Whether the Public Procurement Policy for Micro
and Small Enterprises (MSEs), issued vide S.O. 581(E) dated
23.03.2012, framed under Section 11 of the MSMED Act,
2006, is applicable to composite contracts involving Supply,
Installation, and Testing (SIT)?
11 WP(C) No. 2631/2024
2025:JKLHC-SGR:214
28.To adjudge the applicability of the Public Procurement Policy to
composite contracts, it is imperative to begin with a clear understanding
of the legislative intent and scope of Section 11 of the Micro, Small and
Medium Enterprises Development Act, 2006 (MSMED Act). Section
11 mandates the Central Government and its agencies to promote the
procurement of goods and services from Micro and Small Enterprises
(MSEs). Specifically, Section 11 empowers the Central Government to
notify a scheme for facilitating this public procurement, which
culminated in the issuance of S.O. 581(E), dated 23.03.2012, known as
the Public Procurement Policy for MSEs.
29.This policy mandates that a minimum of 25% of the total annual
procurement of goods and services by Central Government Ministries,
Departments and Central Public Sector Enterprises (CPSEs) must be
made from MSEs.
With a view to discuss issue No.1 it would be appropriate to understand
the nature of the Impugned Contracts: Supply, Installation, and Testing
(SIT).
30.The tenders in question involve composite contracts for Supply,
Installation and Testing (SIT) of electrical infrastructure. These
contracts cover a wide range of work including (i) the supply of
electrical components and equipment, (ii) installation and
commissioning at project sites, and (iii) testing and ensuring
operational readiness. The entirety of the contract is executed as an
integrated package, where the supply of goods is not a standalone
12 WP(C) No. 2631/2024
2025:JKLHC-SGR:214
deliverable component of the contract but is intertwined with the
components of services and works also.
31.Thus, such SIT contracts do not constitute mere procurement of goods
or services in isolation, but involve performance obligations that are
dependent on seamless execution of all elements together. In such
circumstances, it would be artificial and legally impermissible to
bifurcate the contract into “goods” and “services” for the sake of
applying procurement preferences under the MSMED framework.
Further to understand the nature of the contract it is important to
distinguish between policy procurement guidelines, which provides a
standardized framework and project specific guidelines which are
tailored according to the demands of any individuals project.
Policy vs. Project-Specific Procurement Guidelines
32.It must also be recognized that the impugned tenders are issued under
the framework of Centrally Sponsored Schemes (CSS) or Revamped
Distribution Sector Scheme (RDSS) large-scale, mission-mode
infrastructure programs of the Government of India. These programs
typically include stringent implementation timelines, quality control
mechanisms and integrated project delivery models. The procurement
guidelines under such schemes are distinct and customized, and the
general procurement obligations under Section 11 of the MSMED Act
are not intended to override or conflict with such scheme-specific
contractual and technical requirements.
13 WP(C) No. 2631/2024
2025:JKLHC-SGR:214
33.Hence, while the Public Procurement Policy for MSEs is intended to
encourage procurement from MSEs, it cannot operate in derogation of
specialized and composite contracting structures formulated for critical
infrastructure projects, unless the policy or the tender explicitly
incorporates provisions for such inclusion.
34.The issue of whether composite contracts can be divided into supply
and service elements for the purposes of applying a particular statute or
policy has been squarely addressed by the Hon’ble Supreme Court of
India in various authoritative decisions. The consistent judicial view is
that composite contracts are indivisible, and any attempt to dissect them
artificially is not tenable in law.
35. The Hon’ble Apex Court in Bharat Sanchar Nigam Ltd. (BSNL) v.
Union of India, (2006) 3 SCC 1, has dealt with the nature of contracts
involving both goods and services (such as telephone services
involving supply of equipment). The Court held that where a contract is
composite in nature, the dominant intention test must be applied to
assess its true character. The Court emphasized as under:
“A composite contract for providing a service which also
includes incidental supply of goods does not amount to a
sale unless the parties intend so.”
36.Therefore, the law laid down by the Apex Court in the aforesaid case
discourages any attempt to artificially segregate goods from services
where both are integral to the execution of the contract.
14 WP(C) No. 2631/2024
2025:JKLHC-SGR:214
37. Reliance is placed on the decision rendered by the Apex Court in the
case titled, Kone Elevator India Pvt. Ltd. v. State of Tamil Nadu,
(2014) 7 SCC 1, wherein the issue was whether contracts for supply
and installation of elevators could be split for VAT purposes. The
Court held that installation and commissioning are not incidental but
integral parts of the transaction.
“When the consumer places an order for lift, he expects
delivery, installation, and commissioning of the lift, and
hence it is a works contract in entirety.”
38.The judgment reinforces that composite contracts have to be viewed
holistically, particularly where the installation and testing components
are not optional but essential.
39.Further it is important to examine the role of administrative
clarification and how departmental interpretation can effect the
application of policies and procedure.
Administrative Clarifications and Departmental Interpretation.
40.The Ministry of MSME, in its Office Memorandum and responses to
representations, has clarified that the Public Procurement Policy does
not apply to “works contracts”. Where a contract involves construction,
installation or commissioning activities along with supply of materials,
it is deemed outside the scope of the policy unless the tender
specifically calls for discrete procurement of goods or services from
MSEs. These clarifications align with the judicial understanding of
composite contracts.
15 WP(C) No. 2631/2024
2025:JKLHC-SGR:214
41.In the light of above statutory interpretation, judicial pronouncements,
and administrative understanding, it is abundantly clear that the Public
Procurement Policy for MSEs under S.O. 581(E), dated 23.03.2012,
issued under Section 11 of the MSMED Act, 2006, is not applicable to
composite contracts involving Supply, Installation, and Testing (SIT)
of electrical infrastructure as these contracts are integrated in nature,
and cannot be artificially bifurcated into goods and services to attract
procurement preferences which are meant for standalone procurement
transactions. Further, this Court is of the view that such tenders are
issued under Centrally Sponsored Schemes like RDSS, their project-
specific procurement frameworks take precedence unless a conscious
decision is taken by the procuring authority to incorporate MSME-
specific provisions. Absence of such explicit inclusion in composite
SIT contracts fall outside the ambit of the said procurement policy.
42. In TATA Power Company Limited Versus Genesis Engineering
Company reported as 2023 SCC OnLine Del 2366 wherein, it has
held :
“19. In order to ascertain whether the scope of work as
awarded to Petitioner would qualify as a ‘work contract’ or
‘composite supply’, the judgment of the Hon’ble Supreme
Court of India in Kone Elevator India Private
Limited v. State of Tamil Nadu, (2014) 7 SCC 1 is relevant
to appreciate the categories of contract, i.e. (a) Contract for
work to be done for remuneration and for supply of
materials to be used in the execution of work for a price (b)
Contract for work in which the use of the materials is
necessary or incidental to the execution of the work (c)
Contract for supply of goods where some work is required
to done as incidental to the sale. The Hon’ble Supreme
Court has opined that category (a) as composite contract
consisting of two contracts, one of which is for the sale of
goods and the other which is for work and labour. It was
16 WP(C) No. 2631/20242025:JKLHC-SGR:214
held that the involvement of supply of goods and material as
well as installation of the lift had concluded that the
contracts awarded to Kone Elevators satisfy the
characteristics of Works Contract and held that it cannot be
considered as contract of sale.
….20. Applying the judgment to the instant case, the Works
Orders as executed by the parties in the instant case falls
within category (a) as it comprises of two contracts which
include supply of goods such as Cables, wire, connectors,
street lights and poles and subsequent involvement of work
and labour for its installation. Further, the element of both
supply of goods and element of labour and service is
involved in the Work Orders. It is also a settled principled of
law that that dispute/claims arising from Works Contract
are not amenable to the jurisdiction of Facilitation Council
constituted under the MSME Act.”
43.Therefore the Public Procurement Policy under S.O. 581(E) applies
strictly to the procurement of goods and services from MSEs. However,
the impugned tenders relate to composite SIT contracts, which include
elements of design, supply, physical installation and testing forming an
integrated work package. Such contracts are distinct from pure
procurement contracts and cannot be brought within the ambit of the
said policy unless explicitly provided. Judicial interpretation
discourages artificially segmenting composite contracts for the purpose
of applying procurement preferences.
44.This Court is also of the considered view that the Public Procurement
Policy for Micro and Small Enterprises, 2012, issued vide S.O. 581(E)
under Section 11 of the MSMED Act, is confined to the procurement of
goods and standalone services, and does not extend to composite works
contracts involving Supply, Installation and Testing. The impugned
tenders, being indivisible SIT contracts governed by specific scheme
guidelines, fall outside the purview of the said policy, and the
17 WP(C) No. 2631/2024
2025:JKLHC-SGR:214
respondents cannot be faulted for not extending the procurement
preference to such contracts.
45. Since the instant tenders pertains to the Supply, Installation and Testing
(SIT) of electrical infrastructure projects as a part of composite
contract, where the scope of the work is integrated and cannot be
divided into separate procurements for goods, installation or testing
alone.
So issue No.i is accordingly answered in favour of respondents.
ISSUE No.ii: Whether Clause 3 and Clause 11 of the said
Procurement Policy impose a binding obligation on
government departments and PSUs to procure all items
including those forming part of SIT projects exclusively from
MSEs?
46. In the aforesaid background, let us examine the nature and scope of
Clauses 3 and 11 of the said policy:
Clause 3 of the Public Procurement Policy mandates that a minimum
of 25% of the annual procurement of goods and services by Ministries,
Departments and Public Sector Undertakings (PSUs) should be sourced
from Micro and Small Enterprises (MSEs). This clause is designed to
ensure that MSEs have a guaranteed share in the government’s
procurement market, thereby promoting their growth and sustainability.
Clause 11 specifically reserves 358 items for exclusive procurement
from MSEs, facilitating wider dispersal of economic opportunities and
supporting rural and semi-urban enterprise growth.
18 WP(C) No. 2631/2024
2025:JKLHC-SGR:214
Both clauses explicitly focus on procurement, the act of purchasinggoods or services and thus are naturally tailored to contracts which
involve straightforward acquisition of goods or standalone services .
47. On a cumulative reading of the statutory provisions, the Policy under
S.O. 581(E), and the practical realities of SIT contracts, it is clear that
clauses 3 and clause 11 of the policy do not impose a binding
obligation to procure all components of SIT contracts exclusively from
MSEs.
48. Consequently, the respondents were well within their rights to issue
tender covering the SIT of the electrical infrastructure as a part of
composite contract. Given the integrated nature of work, there was no
obligation to rigidly apply the procurement preference to each
component alone. Instead a holistic view of the contract was
appropriate, recognizing that the supply of goods was inseparable from
the associated services of installation and testing.
49. Keeping in view the aforesaid discussion, it is clear that the both
clauses apply only to direct procurement activities. They do not extend
to contracts where supply is merely a component of a broader work
contract. Therefore, these obligations do not bind public authorities in
the context of SIT projects, where procurement, installation and testing
are intrinsically linked and are inseparable.
50.Clause 3 of the Public Procurement Policy mandates that a minimum of
25% of the annual procurement by Ministries, Departments and PSUs
be sourced from Micro and Small Enterprises (MSEs), while Clause 11
exclusively reserves 358 items for procurement from MSEs. However,
19 WP(C) No. 2631/2024
2025:JKLHC-SGR:214
in Lifecare Innovations Pvt. Ltd. v. Union of India (2025) reported as
2025 SCC OnLine SC 436, the Hon’ble Supreme Court clarified that
while these clauses carry the force of law under the MSMED Act, they
apply only to direct procurement of goods and services and do not
confer enforceable rights on individual MSEs. The Court emphasized
that the procurement obligation is institutional and cannot be rigidly
extended to integrated contracts such as SIT (Supply, Installation and
Testing) projects, where the supply component is inseparably linked to
installation and commissioning services. Consequently, these
provisions do not impose a binding obligation on government bodies to
source all SIT project components exclusively from MSEs. The Court
acknowledged that the practical complexities of such bundled contracts
and upheld the discretion of procuring entities in structuring tenders, so
long as the overall 25% procurement target is met across their annual
procurement activities. Therefore, Clauses 3 and 11 do not override the
composite nature of SIT contracts and cannot be applied mechanically
to all their elements.
51.Similarly, in the case of Sterling and Wilson Private Limited v. Union
of India, 2017 SCC OnLine Bom 6829, the Bombay High Court held
as under:
“42. The provisions of Section 11 of the Act and clause 3 of
the Policy envisage procurement of “goods and services”
produced and provided by MSEs. The provisions of the Act
and the Policy are therefore applicable to procurement of
“goods and services” produced and provided by MSEs.
Answer to FAQ No. 18 also makes it abundantly clear that the
policy is meant for procurement of only goods produced and
services rendered by MSEs. However, traders are excluded
from purview of Public Procurement Policy.
20 WP(C) No. 2631/2024
2025:JKLHC-SGR:214
43. The provisions of the Act would therefore not be
applicable to work contracts, which are essentially contracts
of composite nature involving supply of goods as well as
labour/services etc. Similar view has been taken by Delhi High
Court in Shree Gee Enterprises (supra) wherein it has been
held that the policy is not applicable to work contracts simpli
citor and that it is only meant for goods produced and services
rendered by MSEs.
52. A perusal of these clauses reveal that the contract under
tender is a composite contract, which involves supply of goods,
as well as erection, installation and commissioning in
accordance with the plans/drawings, procedures, and specific
specifications. The nature of work requires expertise, special
skill in designing, engineering and various other technical
aspects in erecting, installing, commissioning and making the
firewater spray system operational and functional. The tender
contract of this nature is not for sale of goods simplicitor, but
is a composite contract, which has to be treated as work
contract.
56. In the instant case, as stated earlier, the contract under
tender is a composite contract for supply of goods as well as
installation of fire water spray system, which is a permanent
fixture. The goods supplied under the contract are eventually
assembled and installed at site and become part of the
permanent fixture. The said contract satisfies fundamental
characteristics of work contract and hence cannot be
considered as a contract simplicitor for sale of goods and
services.
57. As stated earlier, the MSMED Act and the Public
Procurement Policy is applicable only to procurement of
goods and services. The contract under tender not being a
contract for sale of goods and predominantly a work contract,
the benefits of the Act and the Policy could not be extended to
the MSEs registered under the Act…”
52.In light of the foregoing discussion, it is evident that Clauses 3 and 11
of the Public Procurement Policy are intended to promote inclusivity
and growth for Micro and Small Enterprises (MSEs) by ensuring their
participation in Government procurement processes. Clause 3 mandates
that at least 25% of the total annual procurement by Ministries,
Departments and Public Sector Undertakings (PSUs) be sourced from
MSEs, establishing an institutional obligation to support these
21 WP(C) No. 2631/2024
2025:JKLHC-SGR:214
enterprises. Clause 11 further strengthens this mandate by reserving
358 items exclusively for procurement from MSEs, thereby aiming to
foster economic decentralization and boost rural and semi-urban
entrepreneurship. However, a cumulative reading of the policy
provisions, statutory notifications (such as S.O. 581(E)), and judicial
interpretation in Lifecare Innovations Pvt. Ltd. v. Union of India
(2025) underscores a crucial distinction between direct procurement
contracts and composite contracts such as SIT (Supply, Installation, and
Testing) projects. The Hon’ble Supreme Court, while recognizing the
statutory force of Clauses 3 and 11 under the MSMED Act, clarified
that these provisions do not create enforceable rights in favor of
individual MSEs for each and every contract. Instead, the obligation is
systemic, requiring compliance with the overall 25% procurement
target on an annual basis rather than at the individual contract level.
Particularly in the case of SIT contracts, where the supply of goods is
intrinsically linked and inseparable from services like installation and
testing, it is neither feasible nor legally mandated to apply the MSE
procurement preferences to each component. The Court further
acknowledged the operational and technical complexities involved in
such bundled contracts and emphasized the need for flexibility in
tender structuring. As such, procuring entities retain the discretion to
issue composite tenders for SIT projects without violating the policy,
provided they adhere to the broader procurement targets set by Clause
3. Therefore, Clauses 3 and 11, while significant in their role of
empowering MSEs, are not absolute in their application and do not
22 WP(C) No. 2631/2024
2025:JKLHC-SGR:214
override the integrated and composite nature of SIT contracts. Their
scope remains confined to direct procurement scenarios, and any
mechanical application to complex contracts would undermine both the
intent and practicality of the procurement framework.
So issue No.ii is also answered in favour of respondents.
ISSUE No. iii: Whether the petitioner, who did not participate
in the tender process, has the requisite locus standi to
challenge the tender notifications in question?
53. With a view to answer this question, it would be apt to analyze the law
laid down by the Hon’ble Apex Court in this regard. This Court is
fortified with the judgment passed by the Apex Court rendered in case
titled “NHAI v. Gwalior-Jhansi Expressway Limited reported in 2018
(8) SCC 243″ The relevant para 20 reads as under:
20. While considering the relief claimed by the respondent
(claimant), the same should have been tested on the touchstone
of the principle governing the tender process, especially when the
validity of the tender document has not been put in issue or
challenged before any competent forum. Going by the terms and
conditions in the tender documents, as already alluded to in para
10 above, there is no tittle of doubt that the right of the claimant
(respondent) to match the bid of L-1 or to exercise ROFR would
come into play only if the respondent was to participate in the
tender process pursuant to the notice inviting tenders from the
interested parties. The objective of tender process is not only to
adhere to a transparent mechanism but to encourage competition
and give equal opportunity to all tenderers with the end result of
getting a fair offer or value for money. The plain wording of the
eligibility clause in the tender documents and the incidental
stipulations make it explicit that the respondent was required to
participate in the tender process by submitting its sealed bid
(technical and financial). The fact that a deeming clause has
been provided in the tender document that if the respondent was
23 WP(C) No. 2631/20242025:JKLHC-SGR:214
to participate in the bidding process, it shall be deemed to fulfil
all the requirements of the tender Clauses 3 to 6 of RFP, being
the existing concessionaire of the project, does not exempt the
respondent from participating in the tender process; rather the
tenor of the terms of the documents made it obligatory for the
respondent to participate in the tender process to be considered
as a responsive bidder, along with others. Having failed to
participate in the tender process and, more so, despite the express
terms in the tender documents, validity whereof has not been
challenged, the respondent cannot be heard to contend that it
had acquired any right whatsoever. Only the entities who
participate in the tender process pursuant to a tender notice can
be allowed to make grievances about the non-fulfilment or
breach of any of the terms and conditions of the tender
documents concerned. The respondent who chose to stay away
from the tender process, cannot be heard to whittle down, in any
manner, the rights of the eligible bidders who had participated in
the tender process on the basis of the written and express terms
and conditions. At the culmination of the tender process, if the
respondent had not participated, in law, the offer submitted by
the eligible bidders is required to be considered on the basis of
the stated terms and conditions. Thus, if the claim of the
respondent was to be strictly adjudged on the basis of the terms
and conditions specified in the subject tender document, the
respondent has no case whatsoever.
54. The Petitioner herein admittedly did not participate in the bidding
process and elected to remain outside the said process. The fact that
Petitioner was the intended supplier would not give any locus to the
Petitioner to challenge the tender process and maintain the instant
petition.
55. In the present case, the petitioner did not submit a bid in response to the
impugned Notice Inviting Tender (NIT). There is no allegation, nor any
material on record, to show that the petitioner was prevented from
participating due to an illegal tender condition, discriminatory
24 WP(C) No. 2631/2024
2025:JKLHC-SGR:214
eligibility criteria, or any deliberate exclusion by the respondents. In
the absence of such factors, the petitioner cannot claim to be an
“aggrieved party” under Article 226 of the Constitution.
56. This Court is fortified with the judgment passed by the Apex Court
rendered in case titled, “Raunaq International Limited Vs. I.V.R.
Construction limited, reported in (1999) 1 SCC 492, wherein it has
been observed as under:-
“In the present case, however, the relaxation was permissible
under the terms of the tender. The relaxation which the Board
has granted to M/s Raunaq International Ltd. is on valid
principles looking to the expertise of the tenderer and his past
experience although it does not exactly tally with the prescribed
criteria. What is more relevant, M/s I.V.R. Construction Ltd. who
have challenged this award of tender themselves do not fulfill the
requisite criteria. They do not possess the prescribed experience
qualification. Therefore, any judicial relief at the instance of a
party which does not fulfill the requisite criteria seems to be
misplaced. Even if the criteria can be relaxed both for M/s
Raunaq International Ltd. and M/s I.V.R. Construction Ltd., it is
clear that the offer of M/s Raunaq International Ltd. is lower
and it is on this ground that the Board has accepted the offer of
M/s Raunaq International Ltd. We fail to see how the award of
tender can be stayed at the instance of a party which does not
fulfill the requisite criteria itself and whose offer is higher than
the offer which has been accepted.”
57. This Court is fortified with the judgment passed by this Court in the
case titled as “R6 Technologies Private Limited Through its
Managing Director/Chief Executive Officer-Riyaz Amin Malik v. UT
of J&K & Ors” reported in 2024 LiveLaw (JKL) 22, the relevant paras
are reproduced as under:
25 WP(C) No. 2631/2024
2025:JKLHC-SGR:214
“34. With a view to decide the controversy in question, this Court
deems it proper to define and emphasize the enlarged role of the
Government in economic activity and its corresponding ability to
give economic „largesse‟ which was the bedrock of creating
what is commonly called the „tender jurisdiction‟. The objective
was to have greater transparency and the consequent right of an
aggrieved party to invoke the jurisdiction of the High Court
under Article 226 of the Constitution of India beyond the issue of
strict enforcement of contractual rights under the civil
jurisdiction. However, the ground reality which is being observed
by the Constitutional Courts today is that almost no tender
remains unchallenged. Unsuccessful parties or parties not even
participating in the tender as it has happened in the instant case,
seek to invoke the jurisdiction of the High Court under Article
226 of the Constitution. The Public Interest Litigation (PIL)
jurisdiction is also invoked towards the same objective, an aspect
normally deterred by the Court because this causes proxy
litigation in purely contractual matters.
35. The judicial review of such contractual matters has its own
limitations. It is in this context of judicial review of
administrative actions that the Apex Court has opined that it is
intended to prevent arbitrariness, irrationality,
unreasonableness, bias and mala fide. The purpose is to check
whether the choice of decision is made lawfully and not to check
whether the choice of decision is sound. In evaluating tenders
and awarding contracts, the parties are to be governed by the
principles of commercial prudence. To that extent, principles of
equity and natural justice have to stay at a distance.”
58. Further the Hon‟ble Apex Court in “Jagdish Mandal v. State of
Orissa, reported in (2007) 14 SCC 517 has been pleased to observe as
under:-
“22. Judicial review of administrative action is intended to
prevent arbitrariness, irrationality, unreasonableness, bias and
mala fides. Its purpose is to check whether choice or decision is
made “lawfully” and not to check whether choice or decision is
“sound”. When the power of judicial review is invoked in matters
relating to tenders or award of contracts, certain special features
should be borne in mind. A contract is a commercial transaction.
Evaluating tenders and awarding contracts are essentially
26 WP(C) No. 2631/20242025:JKLHC-SGR:214
commercial functions. Principles of equity and natural justice
stay at a distance. If the decision relating to award of contract is
bona fide and is in public interest, courts will not, in exercise of
power of judicial review, interfere even if a procedural aberration
or error in assessment or prejudice to a tenderer, is made out.
The power of judicial review will not be permitted to be invoked
to protect private interest at the cost of public interest, or to
decide contractual disputes. The tenderer or contractor with a
grievance can always seek damages in a civil court. Attempts by
unsuccessful tenderers with imaginary grievances, wounded
pride and business rivalry, to make mountains out of molehills of
some technical/procedural violation or some prejudice to self,
and persuade courts to interfere by exercising power of judicial
review, should be resisted. Such interferences, either interim or
final, may hold up public works for years, or delay relief and
succour to thousands and millions and may increase the project
cost manifold. Therefore, a court before interfering in tender or
contractual matters in exercise of power of judicial review,
should pose to itself the following questions: (i) Whether the
process adopted or decision made by the authority is mala fide or
intended to favour someone; or Whether the process adopted or
decision made is so arbitrary and irrational that the court can
say: “the decision is such that no responsible authority acting
reasonably and in accordance with relevant law could have
reached”; 14 (ii) Whether public interest is affected. If the
answers are in the negative, there should be no interference
under Article 226. Cases involving blacklisting or imposition of
penal consequences on a tenderer/contractor or distribution of
State largesse (allotment of sites/shops, grant of licences,
dealerships and franchises) stand on a different footing as they
may require a higher degree of fairness in action.” (pages 531-
532)”
59. Applying these settled principles, the petitioner’s failure to participate
in the tender process coupled with their subsequent attempt to
challenge the same, amounts to an attempt to obtain judicial
intervention without being directly affected, which is impermissible
under the law.
60. Keeping in view the law discussed above, it is clear that the Court
being the guardian of fundamental right is duty-bound to interfere when
there is a strong foundation of arbitrariness, irrationality, mala fide and
bias. And it is also settled legal principle that a person who has not
participated in the tender process lacks the locus standi to challenge the
outcome unless they can establish a case of illegality, mala fides, or
27 WP(C) No. 2631/2024
2025:JKLHC-SGR:214
discriminatory exclusion. In the instant petition the petitioner has
neither participated in the process nor shown any bar or condition that
precluded such participation. As such, the petitioner cannot be
considered an “aggrieved party” and the writ petition is not
maintainable on this ground alone.
61.However, in this case, the petitioner neither submitted a bid nor has
placed on record any substantive allegation or evidence to suggest that
the terms of the NIT were illegal, irrational, or designed to exclude
them unfairly. There is no material to demonstrate that any condition in
the tender notice was violative of constitutional principles or that the
petitioner’s non-participation was the result of any mala fide action on
the part of the respondents. In such circumstances, the petitioner lacks
the requisite legal standing to invoke the writ jurisdiction of the High
Court under Article 226, which is reserved for parties who are directly
and adversely affected by administrative or executive actions. Courts
have consistently held that a person who voluntarily stays away from
the bidding process cannot subsequently assail the same merely on the
basis of a perceived entitlement or general interest. Accordingly, in the
absence of any actionable illegality or denial of opportunity, the present
writ petition is not maintainable and is liable to be dismissed on the
ground of lack of locus standi.
Accordingly, issue no.iii is also decided in favour of respondents.
28 WP(C) No. 2631/2024
2025:JKLHC-SGR:214
CONCLUSION:
62. In the light of foregoing, the petitioners have failed to present any
compelling legal grounds or any factual evidence to substantiate their
claims regarding the issuance of the impugned tenders by the
respondent. The=ir assertion lacks the necessary foundation to
demonstrate any irregularity or illegality in the tender process, thereby
rendering their challenge ill founded, both in terms of law and fact.
63. Thus it can be safely concluded that the respondents have acted in
accordance with the relevant project-specific procurement guidelines,
and there is no statutory obligation to apply the MSE procurement
policy in the context of composite SIT tenders for these projects.
64. In view of the above, this Court holds that the challenge of the
petitioner to the impugned notice inviting tender (NIT) is ill-founded
and the writ petition being devoid of any merit, is liable to be dismissed
and the same is accordingly dismissed alongwith all connected
applications, if any. The interim order dated 13.11.2024 is vacated
forthwith. As a necessary corollary, the respondents are at liberty to
proceed ahead with the tender in question.
65. The writ petition is, accordingly, dismissed alongwith connected
applications.
(WASIM SADIQ NARGAL)
JUDGE
Jammu
12.08.2025
“Gh. Nabi/Secy”
Whether the order is speaking: Yes
Whether the order is reportable: Yes
[ad_1]
Source link