A) ABSTRACT / HEADNOTE

Lifecare Innovations Pvt. Ltd. & Anr. v. Union of India & Ors., Writ Petition (C) No. 1301 of 2021, examines the legal status and enforceability of the Public Procurement Policy for Micro and Small Enterprises (MSEs) Order, 2012 issued under Section 11 of the Micro, Small and Medium Enterprises Development Act, 2006 and tests the validity of mandatory minimum turnover clauses in Notice Inviting Tenders (NITs).

The petitioners, a micro enterprise manufacturing a specialised drug (Liposomal Amphotericin B Suspension LAmB) and its founder, alleged repeated disqualification from government procurement on account of high turnover thresholds which, they contend, frustrate the object of the 2012 Policy to reserve 25% of procurement for MSEs. The Supreme Court held that the Procurement Order 2012 has the force of law as an exercise of power under Section 11, and while it does not create a direct enforceable “right” for an individual MSE, it imposes enforceable duties on statutory authorities, review and grievance mechanisms.

The Court directed the Review Committee to resolve whether the 25% procurement mandate is independent of the 358 reserved items, and ordered both the Review Committee and the Grievance Cell to examine and prescribe limits and guidelines on minimum turnover clauses so these do not defeat the policy.

The Court emphasized institutional judicial review focused on the effective constitution and functioning of statutory bodies (National Board for MSMEs, Advisory Committee, Facilitation Council, Review Committee, Grievance Cell) rather than micro-managing procurement decisions. Directions were given to the respondents to take specified action within 60 days.

Keywords: Micro and Small Enterprises; Procurement Policy 2012; minimum turnover clauses; Notice Inviting Tenders; Section 11 MSMED Act; Review Committee; Grievance Cell

B) CASE DETAILS

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

The judgment anchors on the statutory scheme created by the MSMED Act, 2006 to support, promote and protect micro and small enterprises (MSEs) and the executive exercise of Section 11 power by notifying the Public Procurement Policy for MSEs, 2012. The policy sets an affirmative procurement target originally 20%, later increased to 25% and reserves 358 items for exclusive purchase from MSEs. The statute and policy also establish institutional mechanisms: the National Board for MSMEs, Advisory Committee, Facilitation Council and, within the policy, a Review Committee and a Grievance Cell to monitor implementation and redress grievances.

The petitioners, a micro enterprise engaged in specialised pharmaceutical manufacturing, challenged recurrent exclusions from government tenders triggered by minimum turnover thresholds in NITs. The firm argued that such financial eligibility criteria operate as a functional bar against micro enterprises and thus subvert the procurement preference purpose. The Union and procuring agencies countered that turnover criteria fall within the executive’s commercial discretion to ensure capacity, especially in procurement involving public health and safety.

The Court was therefore asked to decide two core questions: whether the policy creates enforceable obligations to secure 25% procurement from MSEs and whether minimum turnover conditions in tenders violate Articles 14 and 19 or the procurement policy.

The Court framed its response through a doctrinal lens:

(i) treat the 2012 Policy as having the force of law and

(ii) focus judicial review on institutional integrity ensuring the statutory bodies are properly constituted and perform effectively rather than substituting judicial policy-making for specialized administrative mechanisms.

The judgment thus blends substantive policy recognition with institutional remediation: it confirms legal weight of the procurement policy, while directing the Review Committee and Grievance Cell to clarify how turnover requirements must be constrained so as not to nullify the policy’s objects.

D) FACTS OF THE CASE

The petitioners are Lifecare Innovations Pvt. Ltd., a micro enterprise under Section 7 of the MSMED Act, 2006, and its founder. The firm manufactures Liposomal Amphotericin B Suspension in Saline (LAmB), a specialised nano-formulation used as a life-saving antifungal. The drug was recognised by the Government during the COVID-19 related surge of mucormycosis cases. Despite the product’s public-health relevance, the petitioner repeatedly failed to clear government tenders due to mandatory minimum turnover clauses in the relevant NITs. Example: PGIMER’s 2017 NIT required minimum annual turnover of Rs. 20 crores in the preceding three years and Rs. 200 crores cumulative thresholds far exceeding petitioner’s average turnover (approx. Rs. 6–7 crores).

The petitioners sought exemption from turnover thresholds but were refused. Earlier litigation included a writ in the Punjab & Haryana High Court (CWP No. 2268/2017) which was dismissed; an SLP was pending at the Supreme Court. The petitioners contend turnover is an imperfect proxy for manufacturing capability or therapeutic efficacy and that disproportionate thresholds have the effect of excluding micro enterprises from the 25% procurement envisaged by the Procurement Order 2012. The Union produced aggregate procurement statistics showing procurement from MSEs exceeding targets (2019–20 through 2023–24 percentages ranging ~29% to 43.71%), but the Court noted ambiguity whether those figures conflated procurement under clause 3 with clause 11 reserved items.

The CAG audit and the Grievance Cell records revealed deficiencies in grievance redressal and monitoring, including large numbers of unprocessed grievances and inadequate outcome-tracking. The petition therefore sought broad directions: consider MSE bids notwithstanding turnover clauses; alternatively quash contrary NITs; restrict turnover calculations to revenues from the specific drug; and order systemic remedial action by statutory organs.

E) LEGAL ISSUES RAISED

i. Does the MSMED Act and the Public Procurement Policy 2012 mandate procurement of 25% of goods and services by the Government and its instrumentalities from Micro and Small Enterprises?
ii. Are mandatory minimum turnover clauses in NITs violative of Articles 14 and 19 of the Constitution and of the Procurement Policy 2012 and the MSMED Act?
iii. If procurement statistics exceed targets, does that discharge the obligation where reserved items under clause 11 are counted within clause 3 performance?
iv. What remedies and institutional directions are appropriate where tender conditions undermine the procurement preference mandate?

F) PETITIONER / APPELLANT’S ARGUMENTS

i. The counsels for Petitioner / Appellant submitted that minimum turnover clauses are arbitrary and lack rational nexus with the object of procuring safe and efficacious medicines because turnover does not measure manufacturing capability or drug efficacy.
ii. The counsels for Petitioner / Appellant submitted that such clauses operate de facto to exclude micro enterprises — the very class the statutory scheme seeks to promote — thus defeating Clause 3 of the 2012 Policy requiring 25% procurement from MSEs.
iii. The counsels for Petitioner / Appellant submitted that proportionality principles and prior CVC circulars require turnover conditions to bear nexus to procurement value; here such proportionality is absent.
iv. The counsels for Petitioner / Appellant submitted that relief should include directions to permit MSE bids irrespective of NIT turnover clauses or confine turnover calculation to revenues from the specific drug.

G) RESPONDENT’S ARGUMENTS

i. The counsels for Respondent submitted that the Union and procuring agencies have complied with policy targets — aggregate statistics show procurement from MSEs exceeding mandated percentages.
ii. The counsels for Respondent submitted that tender conditions, including minimum turnover criteria, lie within the commercial discretion of contracting authorities to ensure capacity, reliability and public safety—especially in procurement of drugs.
iii. The counsels for Respondent submitted that the petition challenges contractual/technical decisions not ordinarily amenable to judicial intervention and that selective judicial substitution of commercial judgment would be inappropriate.

H) RELATED LEGAL PROVISIONS 

i. Constitution of India — Article 14 (equality before law; reasonableness in administrative action).
ii. Constitution of India — Article 19(1)(g) (right to carry on business) — subject to reasonable restrictions.
iii. Micro, Small and Medium Enterprises Development Act, 2006 — Section 11 (procurement preference policy).
iv. Public Procurement Policy for Micro & Small Enterprises (MSEs) Order, 2012 — Clauses 2, 3, 5, 8, 11, 12, 13 (mandatory procurement, reserved items, Review Committee, Grievance Cell).
v. CVC Circular No. 14/4/07 dated 26.04.2007 (proportionality of turnover to contract value) — persuasive administrative guidance.

I) JUDGEMENT

The Court held the Procurement Order 2012 has force of law as an executive measure under Section 11 and “encapsulates a mandate and discloses a specific purpose.” The Court clarified that while the policy does not create a personal, absolute “procurement right” for an individual MSE, it imposes enforceable obligations on statutory and administrative bodies to implement the procurement preference. Judicial review must emphasize institutional functioning: the constitution, composition, and effective operation of the National Board for MSMEs, Advisory Committee, Facilitation Council, Review Committee, and Grievance Cell ensuring expertise, transparency, accountability, and periodic review.

The Court observed existing evidence (CAG report and government data) indicating overall procurement targets were being met, but questioned whether clause 3’s 25% was achieved independently of clause 11’s reserved items. This ambiguity fell squarely within the Review Committee’s remit. On minimum turnover clauses, the Court recognized the usual deference to executive judgment in prescribing prequalification criteria (capacity and capability), but stressed that where a statutory procurement preference exists those conditions must not defeat the policy.

The Court concluded that minimum turnover clauses cannot be allowed to undermine the Procurement Order 2012. Accordingly, the Court directed the Review Committee to:

(a) examine whether the 25% procurement target is independent of the 358 reserved items and take necessary action;

(b) the Review Committee and the Grievance Cell must examine and declare limits on minimum turnover clauses and issue policy guidelines.

Both tasks were ordered to be completed and uploaded within 60 days. The remedy is institutional: compel effective functioning of the bodies designated to reconcile procurement needs and MSE promotion while leaving technical and policy detail to domain institutions.

a. RATIO DECIDENDI

The central legal ratio is twofold.

First, the Procurement Order 2012 issued under Section 11 of the MSMED Act constitutes a legally enforceable policy instrument; it creates binding duties upon government ministries, departments and PSUs to aim at, and after the statutory period to ensure, procurement from MSEs to the mandated minimum (25%).

Second, while courts should not micro-manage procurement criteria, where administrative measures (e.g., minimum turnover clauses) operate to nullify a clear statutory-executive preference they are inconsistent with the scheme and must be remedied through the institutional mechanisms (Review Committee / Grievance Cell) created by the statute/policy.

Consequently, judicial review ought to secure institutional compliance and integrity rather than substitute judgments on procurement minutiae. This ratio balances deference to administrative expertise with enforcement of statutory policy objectives.

b. OBITER DICTA

The Court made several guiding observations. It noted the importance of institutional capacity: bodies like the Review Committee should possess domain expertise and institutional memory to permit informed, consistent policymaking. The Court observed shortcomings in grievance handling (large backlog and poor routing to the Grievance Cell) as highlighted by the CAG; such operational weaknesses undermine the policy’s efficacy.

The Court reiterated established principles that tender conditions are generally unassailable unless shown malicious or arbitrary, but qualified this by asserting a different posture where a procurement preference is statutorily declared. The Court referenced precedent recognizing when executive policy acquires the force of law and emphasized that procurement preference reflects socio-economic policy to bolster inclusive growth and gendered participation in enterprise. These comments frame an administrative-law principle favouring institutional remediation over piecemeal judicial substitutions.

c. GUIDELINES 

i. Review Committee must determine whether the 25% procurement under clause 3 is to be computed exclusive of procurement under clause 11 (the 358 reserved items), and issue a definitive policy position.
ii. Review Committee to monitor compliance by ministries, departments and PSUs and require substantiation where targets are unmet, per clause 12(2)(3).
iii. Grievance Cell must examine and declare reasonable limits for minimum turnover clauses in NITs so that such conditions do not preclude participation of MSEs; these limits should account for sectoral realities (e.g., pharmaceuticals) and value of the procurement.
iv. Both the Review Committee and Grievance Cell to issue detailed, publicly uploaded guidelines and Annual Procurement Plans/Reports in accordance with clauses 5 and 8 for transparency.
v. Outcome reporting — the Grievance Cell should maintain and publish case outcomes, ensure IGMS/CPGRAMS cases are properly routed and final outcomes recorded.
vi. Proportionality principle — procuring agencies should align turnover or capability thresholds proportionally to the contract value and technical exigencies; blanket high-turnover floors must be avoided.
vii. Time-bound compliance — respondents were directed to implement the above within 60 days and upload decisions for public scrutiny.

I) CONCLUSION & COMMENTS

The judgment is significant for public procurement law and industrial policy. It authoritatively confirms that the Procurement Order 2012 issued under Section 11 carries legal weight and imposes enforceable duties on administrative institutions to promote MSE participation. The Court’s remedial posture is institutionally calibrated: it resists ad hoc judicial interference in procurement selection while insisting on systemic remedies to ensure the policy’s substantive purpose is not hollowed out by tender conditions.

Practically, this produces two complementary outcomes:

(a) procuring agencies are put on notice that aggregate compliance figures will be scrutinised for substance (i.e., whether reserved items are being counted to inflate compliance);

(b) minimum turnover thresholds cannot be used as proxies to exclude MSEs without review by the expert Review Committee and Grievance Cell.

For lawyers and procuring authorities, the ruling underscores the need for proportionate prequalification criteria tied to contract value and sectoral risk, and for robust grievance redressal and data transparency. For MSEs, particularly specialised micro firms, the decision offers an institutional avenue for relief not a guaranteed contract but a structural mechanism to ensure procurement policy translates into market access.

The Court’s emphasis on institutional competence and accountability is sound: effective implementation will depend on the Review Committee and Grievance Cell exercising expertise, publishing clear guidelines, and ensuring transparent monitoring — failing which further litigative intervention may be warranted. The order strikes a practical balance: it enforces statutory purpose while respecting administrative competence in technical procurement matters.

J) REFERENCES

a. Important Cases Referred

i. NBCC (India) Ltd. v. State of West Bengal, 2025 SCC Online 73.
ii. Bennett Coleman & Co. v. Union of India, (1972) 2 SCC 788 (SCR reference as per judgment).
iii. T.N. Godavarman Thirumulpad v. Union of India, 2024 INSC 78.
iv. Association of Registration Plates v. Union of India, (2005) 1 SCC 679.
v. Ugar Sugar Works Ltd. v. Delhi Administration, (2001) 3 SCC 635.

b. Important Statutes Referred

i. Constitution of India — Articles 14, 19.
ii. Micro, Small and Medium Enterprises Development Act, 2006 — Section 11.
iii. Public Procurement Policy for Micro and Small Enterprises (MSEs) Order, 2012 — Clauses 2,3,5,8,11,12,13.