[MSMED Act] MSE Procurement Mandates Do Not Apply To Composite SIT Contracts: J&K&L High Court

The Jammu & Kashmir and Ladakh High Court clarified that the Public Procurement Policy's preference for Micro and Small Enterprises (MSEs) under Clauses 3 and 11 does not automatically extend to composite contracts such as SIT (Supply, Installation, and Testing) projects.A bench of Justice Wasim Sadiq Nargal dismissed a writ petition challenging tender conditions on the ground of non-compliance with the MSE procurement mandate, holding that while the policy provisions enjoy statutory backing under the MSMED Act, their application is systemic rather than contract-specific.The Court observed “Clauses 3 and 11, while significant in their role of empowering MSEs, are not absolute in their application and do not override the integrated and composite nature of SIT contracts. Their scope remains confined to direct procurement scenarios, and any mechanical application to complex contracts would undermine both the intent and practicality of the procurement framework.”Clause 3 mandates that at least 25% of annual procurement by government bodies be sourced from MSEs, while Clause 11 reserves 358 items exclusively for MSE procurement. However, relying on the Supreme Court's ruling in Lifecare Innovations Pvt. Ltd. v. Union of India (2025), the High Court held that the obligation applies at an institutional level across the financial year and not to each individual tender or contract.Noting the technical inseparability of goods and services in SIT contracts, the Court upheld the discretion of procuring entities to issue composite tenders without violating MSE mandates, so long as the overall 25% target is achieved.Finding no irregularity or illegality in the tender process, the Court dismissed the petition, vacated the interim stay, and permitted the authorities to proceed with the project.APPEARANCE:Case-Title: Zain Electricals, Industrial Estate, Sanat, Srinagar vs Union Territory of Jammu & Kashmir, 2025Azhar ul Amin, Sr. Adv. with Mr. Hanan Hussain, Adv. For Petitioner Faheem Nissar Shah, GA for respondent Nos.1 to 4 Mr. Nazir Ahmad, Adv. for Respondent No.5 Mr. Waseem Gul, GA for respondent No. 6Click Here To Read/Download Order

[MSMED Act] MSE Procurement Mandates Do Not Apply To Composite SIT Contracts: J&K&L High Court

Aleem Syeed

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