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Lifecare Innovations Pvt. Ltd. v. Union of India

Writ Petition (Civil) · 2025 INSC 269Decided 25 Feb 2025
W.P.(C) No.-001301 - 2021
Justice Pamidighantam Sri Narasimha · Justice Sandeep Mehta

Background

The petitioner, a Micro Enterprise manufacturing a specialised life-saving anti-fungal drug (used to treat mucormycosis during Covid-19), repeatedly failed to qualify for government tenders because of "minimum turnover clauses" set far above its actual revenue, for example, one tender by PGIMER Chandigarh required a Rs. 20 crore minimum turnover against the company's Rs. 6-7 crore turnover. The company argued this defeated the Government's own Public Procurement Policy for Micro and Small Enterprises (MSE) Order 2012, which is meant to reserve at least 25% of government procurement for such enterprises, and filed a writ petition seeking wider directions for all government bodies to stop using such turnover clauses to exclude MSEs.

Decision Breakdown

The Court held that the 2012 Procurement Order has the force of law (being issued under Section 11 of the MSMED Act, 2006), but clarified that it creates an enforceable duty on government bodies rather than an individual enforceable right for any single MSE to win a particular contract, meaning courts review whether the relevant institutions (the National Board for MSMEs, Review Committee, Grievance Cell, etc.) are properly constituted and functioning, rather than reappreciating each procurement decision. It found that minimum turnover clauses, while generally permissible for tenders involving public safety or critical items, cannot be used in a way that defeats the 25% MSE procurement mandate, and noted government audit findings that the dedicated Grievance Cell for MSE complaints was barely being used. The Court directed the Review Committee under the Policy to clarify within 60 days whether the 25% mandatory procurement target is independent of a separate list of 358 reserved items, and to examine and issue guidelines on the permissible limits of minimum turnover clauses.

Lesson Learnt

A government welfare policy meant to protect small businesses is only as good as the institutional machinery built to enforce it. Courts will hold the government's own review and grievance bodies accountable to actually function, rather than simply declaring a policy right that individuals must fight for case by case.

Official source (sci.gov.in)View Judgment (PDF)

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