Karnataka High Court
Cisb Services Pvt Ltd vs The Union Of India on 15 December, 2025
Author: M.Nagaprasanna
Bench: M.Nagaprasanna
1
Reserved on : 24.11.2025
Pronounced on : 15.12.2025
IN THE HIGH COURT OF KARNATAKA DHARWAD BENCH
DATED THIS THE 15TH DAY OF DECEMBER, 2025
BEFORE
THE HON'BLE MR. JUSTICE M. NAGAPRASANNA
WRIT PETITION No.107353 OF 2025 (GM - TEN)
BETWEEN:
CISB SERVICES PVT. LTD.,
A COMPANY INCORPORATED UNDER
THE INDIAN COMPANIES ACT, 1956
HAVING ITS OFFICE AT 101,
KUSHWAH CHAMBERS,
MAKWANA ROAD, MAROL,
ANDHERI EAST, MUMBAI - 400 059
REPRESENTED BY ITS MANAGER,
SRI J.BASAVARAJ, MANAGER,
HUBBALLI BRANCH, HUBBALLI
S/O SHIVAPPA,
AGED ABOUT 58 YEARS.
... PETITIONER
(BY SRI A.B.PATIL MADAPUR AND
SRI BASAVARAJ S.SATANNAVAR, ADVOCATES)
AND:
1 . THE UNION OF INDIA
REPRESENTED BY ITS SECRETARY
(COMMERCE AND INDUSTRIES)
2
VANIJYA BHAVAN,
NEW DELHI - 110 011.
2 . THE GOVERNMENT E MARKETPLACE
A SPECIAL PURPOSE VEHICLE OF
THE GOVERNMENT OF INDIA
REPRESENTED BY ITS
CHIEF EXECUTOR OFFICER,
HAVING ITS OFFICE AT 2ND FLOOR,
JEEVAN TARA BUILDING,
SANSAD MARG,
NEW DELHI - 110 001.
3 . THE CANARA BANK
REPRESENTED BY ITS
GENERAL MANAGER,
HUBBALLI CIRCLE 2ND FLOOR,
CENTRUM BUILDING
GOKUL ROAD,
HUBBALLI - 580 030.
4 . M/S UNIVERSAL SECURITY AND
PERSONNEL TRAINING SERVICES
WJ74 P6W, 6TH MAIN ROAD,
VYSYA BANK COLONY,
BTM 2ND STAGE, BTM 1ST STAGE
BENGALURU
KARNATAKA - 560 076.
... RESPONDENTS
(BY SRI M.B.KANAVI, ASGI FOR R1;
SRI JITIN CHADDA, A/W SRI SHASHANK S.HEGDE, ADVOCATE FOR R2;
SRI SURESH S.GUNDI, ADVOCATE FOR R3;
R4- SERVED) 3 THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA PRAYING TO A. IT IS THEREFORE PRAYED THAT IN VIEW OF THE ABOVE, IT IS MOST RESPECTFULLY PRAYED THAT THIS HONBLE COURT MAY BE PLEASED TO ISSUE A WRIT OF MANDAMUS OR ANY OTHER APPROPRIATE WRIT, ORDER OR DIRECTION, DECLARING THAT THE STIPULATION IN THE TENDER FLOATED BY THE THIRD RESPONDENT REVERSING 100 PERCENT OF THE WORK FOR MSEs IN THE TENDERS FLOATED BY IT IN TENDER NOS. GEM/2025/B/6577635 DATED 19.08.2025 VIDE ANNEXURE-B AND IGNORING THE BID OF THE PETITIONER THOUGH HE IS FULLY QUALIFIED AND THE LOWEST BIDDER AS ILLEGAL, ARBITRARY, AND CONTRARY TO THE PUBLIC PROCEREMENT POLICY FOR MSEs AND AGAINST THE FUNDAMENTAL RIGHTS GUARANTEED UNDER ARTICLE 19(1)(g) OF THE CONSTITUTION OF INDIA; B. AND CONSEQUENTLY QUASH THE AWARD OF TENDER TO THE 4TH RESPONDENT AS PER ANNEXURE-D AND CONSEQUENTLY DIRECT THE RESPONDENTS TO RECONSIDER THE BIDS OF THE PETITIONER PERMIT THE PETITIONER COMPANY AND OTHER SIMILARLY PLACED ENTITIES TO PARTICIPATE IN THE SAID TENDER PROCESS ON EQUAL TERMS WITH MSEs, SUBJECT TO THE 25 PERCENT RESERVATION CONTEMPLATED UNDER THE GOVERNMENT POLICY AND PASS SUCH OTHER OR FURTHER ORDERS AS THIS HON'BLE COURT MAY DEEM FIT AND PROPER IN THE CIRCUMSTANCES OF THE CASE.
THIS WRIT PETITION HAVING BEEN HEARD AND RESERVED FOR ORDERS ON 24.11.2025, COMING ON FOR PRONOUNCEMENT THIS DAY, THE COURT MADE THE FOLLOWING:-
CORAM: THE HON'BLE MR JUSTICE M.NAGAPRASANNA CAV ORDER The petitioner is before this Court seeking a direction by issuance of a writ in the nature of mandamus to declare that the 4 stipulation in the tender floated by the 3rd respondent in reserving 100% of the work to MSEs in the tenders floated by it, is violative of law and it is in ignorance of the bid submitted by the petitioner, who according to the petitioner, is the lowest bidder and is fully qualified to be awarded the contract.
2. Facts in brief, germane, are as follows:
2.1. The petitioner is said to be a Company established in the year 2004 - a Private Limited Company. It is the case of the petitioner that it is a PAN - India entity and is engaged in providing services in the fields of security, housekeeping and outsourcing. In the year 2004-2005, the averment in the petition is, that the petitioner has been consistently from those said years, providing services to public sector banks and public sector undertakings. On 23-03-2012, the Government of India notifies a Public Procurement Policy for Micro and Small Enterprises (MSEs 2012) (hereinafter referred to as the 'MSE Policy 2012' for short) notified under the MSME Development Act, 2006. The said policy comes to be amended on 09-11-2018, by directing reservation of 25% and 5 providing that MSEs quoting within 15% of the lowest bid may be allowed to match the L1 price and secure a portion of the tender.
2.2. On 04-10-2019, a clarification is issued by the Ministry of MSMEs, holding that the policy 2012, as amended in 2018, increased the procurement of goods and services by government departments from 20% to 25% of the total procurement. Therefore, the procurement, whatever be it, 25% was to be reserved to MSEs and they were required to render 15% of the amount in the lowest bid. When things stood thus, the 3rd respondent-Canara Bank floats a tender through the 2nd respondent-Government E Marketplace (GeM portal) for supply of security guards to it, for the purpose of guarding ATMs and branches. The petitioner participates in the tender, so does the private respondent. The petitioner claims to be fully qualified, but was excluded solely on the ground that he was not a MSE. The tender is finalized and awarded to the 4th respondent, by completely excluding the petitioner and other bidders. Therefore, the petition is preferred, aggrieved by the action of the respondents in reserving 100% of procurement to MSEs, on the score that it is illegal, arbitrary and contrary to MSE policy 6 2012. A consequential direction to quash the award awarded to the 4th respondent is sought.
3. Heard Sri A.B.Patil Madapur and Sri Basavaraj S Satannavar, learned counsels appearing for petitioner, Sri M.B.Kanavi, learned Additional Solicitor General of India for appearing for respondent No.1, Sri. Jitin Chadda and Sri Shashank Hegde, learned counsels appearing for respondent No.2 and Sri Suresh S Gundi, learned counsel appearing for respondent No.3.
4.1. The learned counsel appearing for the petitioner would vehemently contend that the impugned stipulation of 100% reservation for MSEs is arbitrary, unreasonable and discriminatory of its own Government policy, which mandates only 25% of the reservation. The policy, the learned counsel would submit, is the Public Procurement Policy for MSEs 2012, which holds the field even today. The learned counsel would further contend that tender conditions insisting on 100% reservation are arbitrary and exclusion of the petitioner and the like who have adequate experience in providing services is partisanism.7
4.2. The learned counsel would emphasize on the fact that the present tender defeats the concept of level playing field in a tender. It is his submission that the 2nd respondent - GeM portal through whom the tender is floated admits that during the evaluation process, only L1 MSE bidders were considered and non-
MSE L1 bidders were not evaluated or considered for award. It is his submission that there was only one MSE available for evaluation. Therefore, the contention that the 4th respondent was selected by a system is untenable. The learned counsel would emphasize on the fact that the MSE policy 2012 does not authorise outright exclusion of non-MSE L1 bidders. In all, the learned counsel would submit that the action of the 2nd respondent in choosing the 4th respondent and awarding the contract is arbitrarily, unreasonable and requires interference.
5.1. Per-contra, the learned counsel appearing with respondents, in unison, would contend that the petitioner has no locus to challenge the tender process, as the tender is awarded entirely to MSE bidders and the petitioner did not participate in the tender as an MSE bidder, as he was admittedly not an MSE bidder.
8The petitioner is deliberately misleading the Court alleging that the respondents have violated the MSE policy of 2012. In fact, the policy is completely adhered to. In the Manual of Procurement of Non-Consultancy Services, 2025 issued by the Ministry in the purchase preference clause, it is indicated, that in case the tender item cannot be split or divided, the MSE quoting a price within the band of L1 plus 15% can be awarded full and complete tender considering the spirit of the policy.
5.2. The learned counsels would submit that since the buyer, the bank, the 3rd respondent had selected yes to the option for purchase of MSE only, the possibility of awarding a contract to non-
MSE would not arise. The 2nd respondent in particular would submit there were multiple L1 bidders. Therefore, the random algorithm method was undertaken by the 2nd respondent for selection of a successful bidder, which works on a pseudo random number generator. Therefore, the learned counsel would submit that the action of the respondents in awarding the contract to the 4th respondent cannot be termed to be arbitrary.
96. Both the petitioner and the respondents have placed reliance upon the judgments of the High Court of Punjab and Haryana and High Court of Gujarat, which would bear consideration in the course of the Order qua their relevance.
7. I have given my anxious consideration to the submissions made by the learned counsel for the respective parties and have perused the material on record.
8. The afore-narrated facts are not in dispute. In furtherance whereof, the following issue would arise for consideration:
"Whether the tender condition reserving 100% procurement to MSEs would violate Article 14 of the Constitution of India?"
9. To consider the said issue, it is necessary to go to the nuances of the policy. On 23-03-2012, the Government of India notifies the policy under the MSME Development Act. Certain salient features of the policy are required to be noticed. It reads as follows: ".... .... ....
103. Mandatory procurement from Micro Small and Enterprises. (1) Every Central Ministry or Department or Public Sector Undertaking shall set an annual goal of procurement from Micro and Small Enterprises from the financial year 2012-13 and onwards, with the objective of achieving an overall procurement of minimum of 20 per cent, of total annual purchases of products produced and services rendered by Micro and Small Enterprises in a period of three years.
(2) Annual goal of procurement also include sub-contracts to Micro and Small Enterprises by large enterprises and consortia of Micro and Small Enterprises formed by National Small Industries Corporation.
(3) After a period of three years i.e. from 1st April 2015, overall procurement goal of minimum of 20 per cent shall be made mandatory.
(4) The Central Ministries, Departments and Public Sector Undertakings which fail to meet the annual goal shall substantiate with reasons to the Review Committee headed by Secretary (Micro, Small and Medium Enterprises), constituted in Ministry of Micro, Small and Medium Enterprises, under this Policy.
4. Special provisions for Micro and Small Enterprises owned by Scheduled Castes or Scheduled Tribes.- Out of 20 per cent target of annual procurement from Micro and Small Enterprises, a sub-target of 20 per cent (i.e., 4 per cent out of 20 per cent) shall be earmarked for procurement from Micro and Small Enterprises owned by the Scheduled Caste or the Scheduled Tribe entrepreneurs. Provided that, in event of failure of such Micro and Small Enterprises to participate in tender process or meet tender requirements and L1 price, 4 per cent sub-target for procurement earmarked for Micro and Small Enterprises owned by Scheduled Caste or Scheduled Tribe entrepreneurs shall be met from other Micro and Small Enterprises."
(Emphasis supplied) 11 Clauses 3 and 4 are indicative of the fact that the objective of achieving an overall procurement of minimum 20% of the total annual purchases should be rendered by MSEs in a period of 3 years, when the policy was so notified. Therefore, 20% of the target of annual procurement from micro and small enterprises was to be earmarked for procurement from the hands of MSEs. This policy comes to be amended in the year 2018. The clarification issued to the amended policy reads as follows:
"CIRCULAR Subject : Clarification regarding sub-target of procurement from MSEs owned by SC/ST entrepreneurs under the amended Public Procurement Policy for MSEs Order, 2012-reg.
This office is receiving number of queries / references from various Central Public Sector Enterprises (CPSEs) and other stakeholders seeking therein clarification on reservation for SC/ST under amended Public Procurement Policy, notified vide Government of India Gazette Notification S.O. 5670(E) dated 9th November, 2018.
In this connection, it is clarified that there has been no change in the existing policy of 4% reservation in procurement from MSEs owned by SC/ST. Only following changes has been made in the amended policy as approved by the Cabinet.
1. To increase the percentage of procurement of goods and services by Government Department / CPSEs from MSEs from the present at least 12 20% to at least 25% of their total procurement.
2. To provide for 3% reservation for women owned MSEs within the above mentioned 25% reservation to make it more inclusive.
This issues with the approval of the competent authority."
(Emphasis supplied) The amended circular by the Government of India or the circular bringing in the amendment to the policy by the Government of India, increased the percentage of procurement of goods and services by Government of India from MSEs, which was at that point in time at 20% to 25% of the total procurement and was to provide 3% reservation for women owned MSEs within the aforesaid 25%. This is the policy that is presently in operation.
Therefore, the MSEs in any public procurement, is entitled for a 25% of the reservation which would be a part of the tender to be awarded in favour of the MSEs.
10. In the teeth of the aforesaid policies, the 3rd respondent/Canara Bank, a public sector bank, notifies through the 2nd respondent, a Government E Marketplace on 19-08-2025.
Certain clauses of the tender become germane to be considered or 13 to be noticed for a consideration of the issue in the lis. It reads as follows:
" वभाजन/Splitting वभाजन बोल वभाजन लागू नह ं कया गया / Bid splitting not applied.
एमआईआई अनपालन
ु /MII Compliance
एमआईआई अनपालन
ु /MII Compliance yes
एमएसई खर द वर यता /MSE Purchase Preference एमएसई खर द वर यता /MSE Purchase Preference Yes
1. The minimum average annual financial turnover of the bidder during the last three years, ending on 31st March of the previous financial year, should be as indicated above in the bid document. Documentary evidence in the form of certified Audited Balance Sheets of relevant periods or a certificate from the Chartered Accountant/Cost Accountant indicating the turnover details for the relevant period shall be uploaded with the bid. In case the date of constitution / incorporation of the bidder is less than 3-year-old, the average turnover in respect of the completed financial years after the date of constitution shall be taken into account for this criteria.
2. Years of Past Experience required: The bidder must have experience for number of years as indicated above in bid document (ending month of March prior to the bid opening) of providing similar type of services to any Central / State Govt Organization / PSU. Copies of relevant contracts / orders to be uploaded along with bid in support of having provided services during each of the Financial year.
3. Purchase preference to Micro and Small Enterprises (MSEs): Purchase preference will be given to MSEs as 14 defined in Public Procurement Policy for Micro and Small Enterprises (MSES) Order, 2012 dated 23.03.2012 issued by Ministry of Micro, Small and Medium Enterprises and its subsequent Orders/Notifications issued by concerned Ministry. If the bidder wants to avail the Purchase preference for services, the bidder must be the Service provider of the offered Service. Relevant documentary evidence in this regard shall be uploaded along with the bid in respect of the offered service. If L-1 is not an MSE and MSE Service Provider (s) has/have quoted price within L-1+ 15% of margin of purchase preference /price band as defined in the relevant policy, then 100% order quantity will be awarded to such MSE bidder subject to acceptance of L1 bid price. The buyers are advised to refer to the OM No.1 4 2021 PPD dated 18.05.2023 for compliance of Concurrent application of Public Procurement Policy for Micro and Small Enterprises Order, 2012 and Public Procurement (Preference to Make in India) Order, 2017. Benefits of MSE will be allowed only if the credentials of the service provider are validated on-line in GeM profile as well as validated and approved by the Buyer after evaluation of submitted documents.."
.... .... .... अ वीकरण/Disclaimer
The additional terms and conditions have been incorporated by the Buyer after approval of the Competent Authority in Buyer Organization, whereby Buyer organization is solely responsible for the impact of these clauses on the bidding process, its outcome, and consequences thereof including any eccentricity / restriction arising in the bidding process due to these ATCs and due to modification of technical specifications and / or terms and conditions governing the bid. If any clause(s) is / are incorporated by the Buyer regarding following, the bid and resultant contracts shall be treated as null and void and such bids may be cancelled by GeM at any stage of bidding process without any notice:
.... .... ....15
12. Incorporating any clause against the MSME policy and Preference to Make in India Policy.
13. Reference of conditions published on any external site or reference to external documents/clauses.
14. Asking for any Tender fee / Bid Participation fee / Auction fee in case of Bids / Forward Auction, as the case may be.
15. Any ATC clause in contravention with GeM GTC Clause 4 (xiii)(h) will be invalid. In case of multiple L1 bidders against a service bid, the buyer shall place the Contract by selection of a bidder amongst the L-1 bidders through a Random Algorithm executed by GeM system.
16. Buyer added ATC Clauses which are in contravention of clauses defined by template as indicated above in the Bid Details section, EMD Detail, ePBG Detail and MII and MSE Purchase Preference sections of the bid, unless otherwise allowed by GeM GTC.
17. In a category based bid, adding additional įtems, through buyer added additional scope of work/ additional terms and conditions/or any other document. If buyer needs more items along with the main item, the same must be added through bunching category based items or by bunching custom catalogs or bunching a BoQ with the main category based item, the same must not be done through ATC or Scope of Work."
(Emphasis added) In terms of the aforesaid clauses, the splitting of the tender was not applied. It was a two-packet tender and through the GeM portal, the 3rd respondent - Canara Bank requested that they would be preferring only MSEs, as the clause of purchase preference indicates that it is MSE purchase preference. Therefore, there could be 16 participation only of the MSEs and not anybody else.
Notwithstanding the same, the petitioner a non-MSE participates in the tender and quotes the lowest price, however, he is not qualified. The tender is finalized and awarded to the 4th respondent on 30-09-2025. The award of tender reads as follows:
"महोदय / महोदया । Dear Sir/Madam, All of you have been providing guarding arrangements at our branches since 01 July 2025. which is scheduled to end on 30 Sep 2025. Canara Bank Hubballi Circle had floated a tender a tender on GeM for providing Private Security Guards to select branches, and the tender has been awarded to M/S Universal Security and Personnel Training Services.
Towards this, we wish to acknowledge your complete and whole-hearted support in safeguarding our bank assets since the last 03 months. We sincerely cherish our good association with all of you and look forward to being associated with you in future also.
We request your good self to continue the guarding arrangements till 08 Oct 2025 (morning 1000 hours). M/S Universal Security and Personnel Training Services will be taking over the responsibility of guarding arrangements from 08 Oct 2025 (1800 hours onwards).
Kindly note that Armed Guards provided to branches by your respective agencies since March / April 2025, will continue as usual.
Request acknowledge.
ध%यवाद और सादर | Thanks & Regards N Raghuram 17 व'र()*बंधक (सर+ा ु )| (Senior Manager (Security).
सर+ा
ु क+ | Security Cell,
अंचल काया-लय ह.ब/ल
ु |Circle Office Hubballi
केनरा ब1क | Canara Bank
Mob: 6366374751"
The petitioner then files the subject petition contending that it amounts to 100% reservation and is arbitrary.
11. It becomes appositive to refer to the judgment of the High Court of Punjab and Haryana, which considers this issue of a policy of 2012 while dealing with a similar challenge of the 100% of the tender contract being awarded to the petitioner therein who was an MSE, when the policy prevailing at that point in time was or had a cap at 20%. The Punjab and Haryana High Court in the case of CENTRAL INSTITUTE OF PLASTICS ENGINEERING & TECHNOLOGY (CIPET) v. INDIAN OIL CORPORATION LIMITED1, answers the issue as follows:
".... .... ....
8. The Micro, Small and Medium Enterprises Development Act, 2006 (for short 'the 2006 Act') was enacted to provide for 1 2015 SCC OnLine P and H 4276 18 facilitating, promotion, development and enhancing the competitiveness of micro small and medium enterprises.
9. Chapter IV of the 2006 Act provides for measures in furtherance of the object of the Act. Sections 9 and 11 of the 2006 Act would be relevant insofar as the controversy involved in the present case and read in the following terms:
"9. Measures for promotion and development - The Central Government may, from time to time, for the purposes of facilitating the promotion and development and enhancing the competitiveness of micro, small and medium enterprises, particularly of the micro and small enterprises, by way of development of skill in the employees, management and entrepreneurs, provisioning for technological upgradation marketing assistance or infrastructure facilities and cluster development of such enterprises with a view to strengthening backward and forward linkages, specify, by notification, such programmes, guidelines or instructions, as it may deem fit.
11. Procurement preference policy - For facilitating promotion and development of micro and small enterprises, the Central Government or the State Government may, by order notify from time to time, preference policies in respect of procurement of goods and services, produced and provided by micro and small enterprises, by its Ministries or departments, as the case may be, or its aided institutions and public sector enterprises."
10. In exercise of the powers conferred under Section 11 of the 2006 Act, the Ministry of Micro, Small and Medium Enterprises, Office of Development Commissioner (MSME) has notified the Public Procurement Policy, 2012 and the same has been made effective from 1.4.2012. Clauses 3 and 6 of the Public Procurement Policy, 2012 are in the following terms:
"Clause 3. Mandatory procurement from micro Small Clause and Enterprises. -
(1) Every Central Ministry or Department or Public Sector Undertaking shall set an annual goal 19 of procurement from Micro and Small Enterprises from the financial year 2012-13 and onwards, with the objective of achieving an overall procurement of minimum of 20 per cent, of total annual purchases of products produced and services rendered by Micro and Small Enterprises in a period of three years.
(2) Annual goal of procurement also include sub- contracts to Micro and Small Enterprises by large enterprises and consortia of Micro and Small Enterprises formed by National Small Industries Corporation.
(3) After a period of three years i.e. from 1st April 2015, overall procurement goal of minimum of 20 per cent shall be made mandatory.
(4) The Central Ministries, Departments and Public Sector Undertakings which fail to meet the annual goal shall substantiate with reasons to the Review Committee headed by Secretary (Micro, Small and Medium Enterprises), constituted in ministry of Micro, Small and Medium Enterprises, under this Policy.
Clause 6. Price quotation in tenders. - (1) In tender, participating Micro and Small Enterprises quoting price within price band of L1+15 per cent shall also be allowed to supply a portion of requirement by bringing down their price to L1 price in a situation where L1 price is from someone other than a Micro and Small Enterprise and such Micro and Small Enterprise shall be allowed to supply upto 20 per cent of total tendered value.
(2) In case of more than one such Micro and Small Enterprise, the supply shall be shared proportionately (to tendered quantity)."
11. A conjoint reading of Sections 9 and 11 of the 2006 Act as also Clauses 3 and 6 of the Public Procurement Policy, 2012 would clarify that there is a mandate to every Central Ministry/Department/Public Sector Undertaking to achieve an overall procurement of minimum of 20% of the total annual purchase of products 20 produced and services rendered by Micro and Small Enterprises in a period of three years. Such mandate would be towards a purchase preference in favour of a Micro and Small Enterprise. The price preference is envisaged in Clause 6 of the Public Procurement Policy, 2012 whereby in a tender process, a participating Micro and Small Enterprise quoting price within the price band of 'L1' (lowest bid) plus 15% shall be allowed to supply a portion of the requirement by bringing down their price to 'L1' price and such Micro and Small Enterprise is to be allowed to supply upto 20% of the total tendered value.
12. Adverting back to the facts of the present case, in the notice inviting tender dated 30.12.2014, Annexure 'L' was appended along with, containing tender conditions for benefits/preference for Micro and Small Enterprises (MSEs). Clause VI of Annexure 'L' provided for price preference and stated clearly that where the tendered quantity cannot be split, the Micro and Small Enterprise shall be allowed to supply total tendered quantity provided its quoted price is within a price band of 'L1' plus 15% and upon matching the 'L1' price. In case of more than one such Micro Small Enterprise being in the price band of 'L1' plus 15% and upon matching the 'L1' price, the supply may be shared proportionately amongst such MSEs. Column 13 of the Notice Inviting Tender dated 30.12.2014 regulating preference to MSEs categorically stipulated that "this tender cannot be split".
13. In our considered view, the action of respondent No. 2, Indian Oil Corporation in awarding the complete work order (100%) to respondent No. 3, a registered Micro and Small Enterprise conforms to the terms and conditions of the Notice Inviting Tender dated 30.12.2014 and does not even fall foul of the Public Procurement Policy, 2012. The Public Procurement Policy, 2012 carries a mandate to provide purchase preference in favour of a Micro and Small Enterprise so as to achieve an overall procurement of "minimum of 20%" "minimum 20%". Clause 6 of the the Public Procurement Policy, 2012 providing for price preference would hold the field in a situation where the work order can be split and as 21 such, a participating Micro and Small Enterprise quoting price within price band of 'L1' plus 15% would be allowed to supply a portion of the requirement and upto 20% of the total tendered value. In the Notice Inviting Tender dated 31.12.2014, while providing for preference to MSEs, it was stipulated that the "tender cannot be split". In such an eventuality, it was open for respondent No. 2, Indian Oil Corporation to have granted purchase preference as also price preference in favour of respondent No. 3, a registered Micro and Small Enterprise as regards the complete work order as it had quoted a price within the price band of 'L1' plus 15% and has thereafter matched the 'L1' price.
14. The issue raised on behalf of the petitioner- Institute as regards the condition contained in the Notice Inviting Tender stipulating "tender cannot be split" to be unreasonable and arbitrary would be beyond the scope of writ jurisdiction. Judicial review in contractual matters is confined to the manner in which the decision is taken rather than the decision itself. The Courts would interfere if the decision is arbitrary, unreasonable or actuated by malafides. This Court would not enter into technical issues as regards a work order being open to a division/split as it does not have the expertise to deal with such issues. The Government or a public sector undertaking must have freedom in formulating such conditions. This Court cannot sit as a Court of appeal to review and modify administrative decisions unless the same are shown to be suffering from the vice of arbitrariness or favouritism.
15. In Sterling Computers Ltd. v. M & N Publications Ltd. AIR 1996 SC 51, it was held as under:
"While exercising the power of judicial review, in respect of contracts entered into on behalf of the State, the Court is concerned primarily as to whether there has been any infirmity in the 'decision making process'. By way of judicial review the court cannot examine the details of the terms of the contract which have been entered into by the public bodies or the State. Courts have inherent limitations on the scope of any such 22 enquiry. But at the same time ... the courts can certainly examine whether 'decision-making process' was reasonable, rational, not arbitrary and violative of Article 14 of the Constitution.
If the contract has been entered into without ignoring the procedure which can be said to be basic in nature and after an objective consideration of different options available taking into account the interest of the State and the public, then court cannot as an appellate authority by substituting its opinion in respect of selection made for entering into such contract."
16. Even otherwise, the petitioner had responded to the Notice Inviting Tender dated 30.12.2014 and as such, was bound by the terms and conditions contained therein. The purchase as also the price preference in favour of a Micro and Small Enterprise stood enumerated therein. Having participated in the tender process and having remained unsuccessful, it would not be open for the petitioner to now turn around and raise a challenge to any of the terms and conditions contained in the Notice Inviting Tender.
17. For the reasons recorded above, the allotment of complete work order to respondent No. 3 cannot be termed as arbitrary or unreasonable. Rather, we find the same to be in conformity with the terms and conditions contained in the Notice Inviting Tender dated 30.12.2014 as also in consonance with the Public Procurement Policy, 2012. No interference, as such, is warranted under Article 226 of the Constitution of India."
(Emphasis supplied) The Punjab and Haryana High Court observes that the mandate is to achieve overall procurement of minimum of 20% of the total annual purchase to MSEs in a period of 3 years. Such mandate 23 would be the purchase preference in favour of MSE. The purchase preference therein was clearly indicative of the fact that the tender inviting authority wanted only the MSEs. In the light of the fact that tender cannot be split as a condition in the notice inviting tender in the case before the Punjab and Haryana High Court, the said clause cannot be held to be Arbitrary is what is held by the Punjab and Haryana High Court.
12. Identical issue of selection by a pseudo-random method of algorithms was considered by the Gujarat High Court in the case of SPIRE ENTERPRISE v. GOVERNMENT E-MARKETPLACE SPV2, where the Division Bench of the Gujarat High Court, in terms of its judgment dated 22-08-2023, holds as follows:
".... .... ....
3. The challenge to the tender awarded in favour of respondent No. 2 pursuant to the bid dated 30.05.2023 for procurement of services of respondent No. 6 for outsourcing of manpower on the ground that the method known as "Random Algorithm" adopted by the respondent No. 2 in selection of all tenderers placed in L-1 category, cannot be said to be fair and transparent. The contention is that though "Random Selection" was made through the machine but the information in the machine was inserted 2 2023 SCC OnLine Guj 2805 24 by the officers who cannot be said to have been acted in a fair manner. It is then submitted that even no information was given to the writ-petitioner or other tenderers after the section in the Random Selection, till the work order is issued to the selected tenderer.
4. Noticing the manner in which the selection of respondent No. 6 has been made in the instant case through machine by adopting the method of random algorithm, we are of the considered view that this is the most transparent and fair manner of selection of tenderer for providing the services of outsourced man power. As no human intervention has been made in the selection of one of the tenderer who was also placed as L-1, no arbitrariness can be attached to the selection process. As the decision making process is found to be transparent and fair, we do not find it a fit case for interference. The contention of learned counsel for the petitioner that this is a clear case of violation of Article 14 of the Constitution of India inasmuch as two similarly placed persons have been discriminated is found to be misconceived, inasmuch as, Article 14 does not come into play in the tender process.
5. Moreover, the manner in which, the selection has been made through machine and no one is informed that the person selected till work contract is issued, would remove all possibility of human intervention at any stage of the award of contract."
(Emphasis supplied) The said judgment was tossed by M/s. Spire Enterprises before the Apex Court in SLP 50934 of 2023, which comes to be dismissed by an order dated 03-01-2024 and it reads as follows:
"1. Delay condoned.25
2. We are not inclined to entertain the Special leave Petition under Article 136 of the Constitution of India.
3. The Special Leave Petition is accordingly dismissed."
13. In the light of the aforesaid judgment of the High Court of Punjab and Haryana, which affirmed 100% reservation as a result of a tender that could not be split, to be non-arbitrary, as also, the Division Bench of Gujarat High Court considering an identical algorithm method, which resulted in random selection making through the machine not being arbitrary and the Special Leave Petition against the said order being dismissed, I am in respectful agreement with the High Court of Punjab and Haryana and deem it appropriate to follow the Division judgment of the High Court of Gujarat.
14. If the law as declared by the afore-quoted two High Courts, is considered qua the facts obtaining in the case at hand, what would unmistakably emerge is, a similar contention was taken by the petitioner, as was taken before the Gujarat High Court. The justification by the 2nd respondent is, there were multiple L1 bidders when the tender was notified. The tender could not be split and the 26 result of multiple L1 bidders led the 2nd respondent to resort to algorithm method for random selection. The result of the random selection is the 4th respondent being awarded the contract.
Therefore, the policy or its amendments nowhere indicates that more than 25% purchase preference or 100% of the contract cannot be awarded to MSEs.
15. In the case at hand, it was the preference of the Tender Inviting Authority or it was the preference of the person who wanted the tender in a particular manner. The purchase preference given by Canara Bank to whom the tender was called or to whose benefit the tender was called, to be only from the hands of the MSE. Therefore, this Court, in exercise of its jurisdiction under Article 226 of the Constitution of India, would not sit and tinker those conditions of the Tender Inviting Authorities as to their need or requirement in a tender. The said issue is also considered by the Apex Court in the case of AIRPORT AUTHORITY OF INDIA v.
27CENTRE FOR AVIATION POLICY, SAFETY & RESEARCH (CAPSR)3, wherein the Apex Court holds as follows:
".... .... ....
28. While considering the scope and ambit of the High Court under Article 226 of the Constitution of India with respect to judicial scrutiny of the eligibility criteria/tender conditions, few decisions of this Court are required to be referred to, which are as under:
29. In the case of Maa Binda Express Carrier (supra), in paragraph 8, this Court observed and held as under:
"8. The scope of judicial review in matters relating to award of contracts by the State and its instrumentalities is settled by a long line of decisions of this Court. While these decisions clearly recognise that power exercised by the Government and its instrumentalities in regard to allotment of contract is subject to judicial review at the instance of an aggrieved party, submission of a tender in response to a notice inviting such tenders is no more than making an offer which the State or its agencies are under no obligation to accept. The bidders participating in the tender process cannot, therefore, insist that their tenders should be accepted simply because a given tender is the highest or lowest depending upon whether the contract is for sale of public property or for execution of works on behalf of the Government. All that participating bidders are entitled to is a fair, equal and non-discriminatory treatment in the matter of evaluation of their tenders. It is also fairly well settled that award of a contract is essentially a commercial transaction which must be determined on the basis of consideration that are relevant to such commercial decision. This implies that terms subject to which tenders are invited are not open to the judicial scrutiny unless it is found that the same have been tailor-made to benefit any particular tenderer or class of 3 2022 SCC OnLine SC 1334 28 tenderers. So also, the authority inviting tenders can enter into negotiations or grant relaxation for bona fide and cogent reasons provided such relaxation is permissible under the terms governing the tender process."
30. In the case of Michigan Rubber (India) Ltd. (supra), after considering the law on the judicial scrutiny with respect to tender conditions, ultimately it is concluded in paragraph 23 as under:
"23. From the above decisions, the following principles emerge:
(a) The basic requirement of Article 14 is fairness in action by the State, and non-
arbitrariness in essence and substance is the heartbeat of fair play. These actions are amenable to the judicial review only to the extent that the State must act validly for a discernible reason and not whimsically for any ulterior purpose. If the State acts within the bounds of reasonableness, it would be legitimate to take into consideration the national priorities;
(b) Fixation of a value of the tender is entirely within the purview of the executive and the courts hardly have any role to play in this process except for striking down such action of the executive as is proved to be arbitrary or unreasonable. If the Government acts in conformity with certain healthy standards and norms such as awarding of contracts by inviting tenders, in those circumstances, the interference by courts is very limited;
(c) In the matter of formulating conditions of a tender document and awarding a contract, greater latitude is required to be conceded to the State authorities unless the action of the tendering authority is found to be malicious and a misuse of its statutory powers, 29 interference by courts is not warranted;
(d) Certain preconditions or qualifications for tenders have to be laid down to ensure that the contractor has the capacity and the resources to successfully execute the work; and
(e) If the State or its instrumentalities act reasonably, fairly and in public interest in awarding contract, here again, interference by court is very restrictive since no person can claim a fundamental right to carry on business with the Government."
31. In the aforesaid decision, it is further observed that the Government and their undertakings must have a free hand in setting terms of the tender and only if it is arbitrary, discriminatory, mala fide or actuated by bias, the courts would interfere. It is further observed that the courts cannot interfere with the terms of the tender prescribed by the Government because it feels that some other terms in the tender would have been fair, wiser or logical."
(Emphasis supplied) The Apex Court holds the terms and conditions of invitation of a tender are within the domain of the Tender Inviting Authority and is not open to judicial scrutiny, unless it depicts arbitrariness, palpable and demonstrable, or is a product of a decision laced with mala fides.
16. If the conditions of interference as held by the Apex Court is again considered qua the facts obtaining in the case at hand, the 30 facts does nowhere brood arbitrariness that is palpable or demonstrable. The Government or the 3rd respondent who is wanting the procurement only from the MSE, a non-MSE participating in the tender projecting that there is arbitrariness in the 3rd respondent seeking only MSE and is contrary to the policy, is a submission that is noted only to be rejected, as it is trite that this Court would not sit in the armchair of the experts to assess the tender or the requirement of the tender inviting authority. The tender inviting authority must have free hand in setting the terms of tender and this Court would be loawthe to interfere with those conditions, except in the circumstances narrated hereinabove, which I do not find in the case at hand.
Finding no merit in this petition, petition stands rejected.
Interim order of any kind subsisting stands dissolved.
Sd/-
(M.NAGAPRASANNA) JUDGE bkp CT:MJ