WORK CONTRACTS DO NOT COME UNDER PURVIEW OF PPP POLICY UNDER MSME ACT

Date of post - 2025-11-21


Case Details

  • Case No: WP(C)/4448/2024
  • Court: The Gauhati High Court
  • Judge: Honourable Mr. Justice Michael Zothankhuma
  • Date of Order: January 8, 2025

Core Dispute

The petitioner, M/S Northeast Engineering and Construction, challenged the disqualification of their Technical Bid for a "Composite Works" tender. The petitioner, a Micro and Small Enterprise (MSE), claimed they were exempt from paying the Earnest Money Deposit (EMD) under the Public Procurement Policy 2012 (PPP-2012). Their bid was rejected specifically because they failed to submit the EMD.

Arguments Presented

1. The Petitioner's Argument:

  • As a registered MSE, the petitioner argued they are entitled to an exemption from EMD under the PPP-2012.
  • They contended that the rejection of their bid on these grounds was arbitrary.

2. The Respondents' Argument:

  • Nature of Contract: The tender was for a "Work Contract," which does not fall under the purview of the PPP-2012.
  • Government Clarification: A clarification issued by the Ministry of MSME on August 31, 2023, explicitly stated that PPP-2012 benefits (like EMD exemption) apply to goods and services but exclude traders and "work contracts".
  • Non-Joinder: The petitioner failed to include the successful bidder (Bridge and Roof Company Limited) as a party to the case, which is grounds for dismissal.

Court's Observations and Findings

A. Applicability of PPP-2012 to Work Contracts The Court analyzed whether the EMD exemption for MSEs covers work contracts. Relying on precedents from the Delhi, Bombay, and Andhra Pradesh High Courts, the Court concluded:

  • Distinction of Contracts: The MSMED Act and PPP-2012 are designed for the procurement of "goods produced" and "services rendered." A "Work Contract" is a composite contract involving both goods and labor/services and is legally distinct.
  • Judicial Precedent: The Court cited Sterling and Wilson Private Limited vs. Union of India and Rashtriya Ispat Nigam Limited vs. Union of India, ruling that the purchase preference and exemptions are restricted to goods and services, not work contracts.
  • Final Ruling on Policy: Based on the MSME Ministry's clarification (dated 31.08.2023), work contracts do not fall within the purview of PPP-2012.

B. Estoppel and Waiver

  • Knowledge of Terms: The Notice Inviting Tender (NIT) dated April 16, 2024, clearly indicated that the EMD exemption clause had been struck out. The petitioner submitted their bid with full knowledge of this term.
  • Belated Challenge: The petitioner participated in the tender without objection and only challenged the clause after being disqualified. Citing Sibaram Deka vs. State of Assam, the Court held that an unsuccessful bidder cannot challenge the tender conditions after participating in the process.

Final Verdict

The High Court dismissed the writ petition. It ruled that "work contracts" are excluded from the exemptions provided under PPP-2012 and that the petitioner could not challenge the tender terms after having participated in the bidding process.