MSE purchase preference does not override mandatory turnover requirements in public-health procurements.

The Directorate General Armed Forces Medical Services, Ministry of Defence, issued a GeM tender dated 17 July 2025 for the supply, installation and commissioning of 13 RO water plants for haemodialysis.

The tender prescribed a minimum average annual turnover of ₹2 crore for the bidder and an OEM average annual turnover of ₹48 crore, subsequently reduced to ₹33 crore after representations from bidders.

The petitioner, a registered micro enterprise and claimed OEM of the offered dialysis-grade RO plants, possessed relevant certifications, regulatory approvals, patents and installation experience.

It challenged the turnover requirements as arbitrary, disproportionate and violative of Articles 14 and 19(1)(g), contending that the requirement effectively excluded micro enterprises while the tender separately granted purchase preference to MSEs under Clause 5.

The respondent justified the turnover condition on the basis that the procurement concerned life-support medical equipment and required financial and operational capacity for supply, installation, warranty, maintenance and after-sales support.

The petitioner’s average annual turnover was ₹75.22 lakh, substantially below the prescribed OEM turnover of ₹33 crore.

The tender document also expressly stated that exemption from experience and turnover requirements would not be available.

Whether the respondent’s requirement that an OEM bidder possess an average annual turnover of ₹33 crore was arbitrary, disproportionate or otherwise invalid, particularly in relation to an MSE engaged in supplying health-related equipment

Whether the petitioner, merely by being a registered micro enterprise and OEM, was entitled to the purchase preference under Clause 5 despite failing to satisfy the prescribed turnover eligibility condition

The Court applied the Public Procurement Policy for Micro and Small Enterprises (MSEs) Order, 2012, under which purchase preference is available to eligible MSEs only after they satisfy the applicable eligibility and technical requirements.

It considered the Office Memorandum dated 20 September 2016, which permits procurement entities, where adequate justification exists, not to relax prior-turnover and prior-experience requirements in procurements concerning public safety, health, critical security operations and equipment.

The Court also applied the tender document itself, including the provision denying exemption from turnover and experience requirements and Clause 5 governing MSE purchase preference.

Relying on Agmatel India Private Limited v. Resoursys Telecom, (2022) 5 SCC 362, the Court held that the tendering authority is ordinarily the best interpreter of its tender conditions, and judicial interference is warranted only where the interpretation or decision suffers from illegality, irrationality, mala fides, perversity or procedural impropriety.

The Court held that the procurement involved ultra-pure RO plants for haemodialysis and therefore directly implicated public health, patient care and the operational readiness of Armed Forces hospitals.

In that context, the respondent was entitled under the 20 September 2016 OM to retain a turnover requirement where adequate justification existed.

The reduction of the OEM turnover requirement from ₹48 crore to ₹33 crore, representing approximately 100% of the bid value, was treated as a considered measure adopted after representations and approval by the competent authorities.

The petitioner’s turnover of ₹75.22 lakh was far below ₹33 crore and even below the approximate value of a single equipment unit, giving the respondent a rational basis to doubt its capacity to execute the contract and provide long-term warranty and maintenance support.

The Court rejected the argument that Clause 5 overrode the eligibility requirements. Purchase preference operated only after the bidder crossed the eligibility and technical-evaluation stage; it could not be invoked to bypass a mandatory turnover condition.

Although the Court acknowledged an anomaly in extending MSE purchase preference while simultaneously excluding turnover exemption, it held that the tender had to be read as a whole, including the express denial of exemption.

Consequently, Clause 5 could apply only to an MSE that otherwise satisfied the ₹33 crore turnover threshold, and not to the petitioner.

It held that the ₹33 crore OEM turnover requirement was not liable to be interfered with in the circumstances of a health and safety-related procurement, and that the petitioner could not claim MSE purchase preference without first satisfying the mandatory turnover eligibility condition.

The Court directed the respondent to complete the delayed procurement process expeditiously and advised it to rectify the anomaly in the tender conditions in future tenders.

No order as to costs was made.