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IN THE HIGH COURT OF ALLAHABAD
ASHWANI KUMAR MISHRA, VIPIN CHANDRA DIXIT, JJ.
Thoughtsol Infotech Private Limited – Appellant
versus
Union Of India And 2 Others – Respondent
WRIT - C No. - 605 of 2025
Decided on : 10-03-2025
(A) Micro, Small and Medium Enterprises Development Act, 2006 - Public Procurement Policy for Micro and Small Enterprises Order, 2012 - Award of cloud services contract by Directorate General of Hydrocarbons to third respondent despite petitioner being lowest bidder challenged - Court found the preferential treatment to third respondent as arbitrary since the substantial part of the contract was to be performed by a non-MSE (Amazon Web Services) - The MSE policy benefits are not applicable to works contracts or where the MSE does not produce goods or render services. (Paras 1, 6, 72, 92)
(B) Judicial Review - The scope of judicial review in contractual matters is limited, and courts should defer to the interpretation of the tendering authority unless there is a clear case of arbitrariness or irrationality. (Paras 34, 70)
Facts of the case:
The petitioner challenged the award of a cloud services contract to a registered MSE despite being the lowest bidder. The core functions of the contract were to be performed by a non-MSE, leading to claims of irrationality in the award process.
Findings of Court:
The court determined that the contract was predominantly a works contract and the third respondent's role was merely incidental, thus disqualifying it from MSE benefits.
Issues: Whether the award of the contract to the third respondent was justified under the MSE policy when the primary services were to be provided by a non-MSE.
Ratio Decidendi: The court held that the MSE policy does not apply to works contracts or where the MSE does not render the core services, reaffirming that preferential treatment in such cases is arbitrary.
Result: The award of the cloud contract to the third respondent was quashed, and the Directorate General of Hydrocarbons was directed to proceed in accordance with the law.
JUDGMENT :
Ashwani Kumar Mishra, J.
1. Award of contract for hiring of cloud services for up- gradation of National Data Repository, by the Directorate General of Hydrocarbons, in favour of third respondent company, notwithstanding the lowest bid of petitioner, is the subject matter of challenge in this petition. The petitioner submits that preferential treatment meted out to the third respondent on account of its status as registered Micro & Small Enterprise (in short ‘MSE’), although substantial part of the contract is to be performed by Non-MSE i.e. Amazon Web Services (in short ‘AWS’) is in teeth of the applicable MSME policy and its objectives and thus wholly irrational and arbitrary.
2. Directorate General of Hydrocarbons (hereinafter referred to as ‘DGH’) came to be established under the administrative control of Ministry of Petroleum and Natural Gas, Government of India in 1993. Its object was to promote sound management of oil and natural gas resources having regard to environment, safety, technological and commercial aspects of the petroleum activity. DGH was also entrusted the management of natural exploration and production (E&P) data in the oil and natural gas sector.
3. The E&P data is owned by the Government of India and is a national asset. By way of an amendment introduced in Petroleum and Natural Gas (Amendment) Rules, 2006 every E&P operator in India is obliged to provide free of cost all data earlier obtained or to be obtained as a result of petroleum operations in India to the Central Government or its designated agency. The E&P data policy issued by the Ministry in 2017 contemplates creation of a framework for data assimilation, disclosure, sharing, accessibility and dissemination through a National Data Repository (in short ‘NDR’). This was in accordance with the policy decision taken by the Government of India on 28.2.2014. NDR came to be formally launched to public on 28.6.2017. It is currently operational at OIDB Building at Noida, Gautam Buddh Nagar, Uttar Pradesh.
4. DGH has floated tenders on GeM portal (Government e Marketplace for short ‘GeM’) on 22.3.2024 for hiring of cloud service for upgradation of national data repository on DGH on cloud platform (hereinafter referred to as the ‘cloud contract’). Petitioner and third respondent both qualified technically for the award of cloud contract and after evaluation of their financial bids the petitioner was shortlisted as L1 (lowest tenderer) having offered the most competitive rates for the project. Despite petitioner being the L1 (lowest tenderer) the cloud contract has not been awarded to the petitioner. The reason for it is that third respondent is a registered MSE and in accordance with the applicable provisions it has been given the option to match its financial bid with that of the petitioner.
5. Micro, Small, and Medium Enterprise Development Act, 2006 (hereinafter referred to as ‘the Act of 2006’) as well as policy documents issued thereunder are relied upon by DGH for award of the cloud contract to the third respondent on 26.12.2024.
6. Aggrieved by the award of cloud contract to third respondent the petitioner, a non-MSE enterprise, has filed the present petition. In addition, the petitioner submits that being the lowest tenderer for the cloud contract it ought to be awarded cloud contract. Consequently, a further prayer is made to command the DGH to award the cloud contract in favour of the petitioner.
7. The writ petition was entertained on 10.1.2025 and time was allowed to the respondents to obtain proper instructions. DGH filed a short counter affidavit in the matter on 21.1.2025. Counter affidavit of the third respondent was also filed on 27.1.2025. The matter was heard at some length and this Court passed following orders on 31.1.2025:-
“When the matter is taken up today, learned Senior Counsel for the petitioner Sri J.S.I. Deepak has placed before the Court a written submission annexing documents to show that substantial part of the contrac
The MSE policy does not apply to works contracts or when the MSE does not provide the core services, rendering preferential treatment arbitrary.
The court upheld that 100% reservation for MSEs in public procurement is valid under the MSE Policy, rejecting claims of arbitrariness towards tender selection processes.
The procurement policy mandates that specified items must be exclusively acquired from Micro and Small Enterprises, rejecting attempts to disguise procurement as a works contract.
The Council has jurisdiction to adjudicate disputes in cases of works contracts, even if there is an arbitration clause in the contract.
The exemption for Micro and Small Enterprises under the Public Procurement Policy does not apply to work contracts, as clarified by the Ministry of MSME.
The court ruled that a contract involving both supply and installation qualifies as a works contract, which is outside the jurisdiction of MSMED Act, leading to the Arbitrator's award being set aside....
Point of Law : Court would not sit in the arm chair of experts or the Tender Scrutiny Committee, which has scrutinized and found the 3rd respondent to be responsive and had to be awarded the contract....
The MSEFC lacks jurisdiction to adjudicate disputes arising from works contracts, which necessitate arbitration under traditional frameworks, not the MSMED Act.
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