1. This writ petition has been filed by the petitioner firm questioning the validity of the Clause 4.2 indicated in Notice Inviting Tender (Annex.3), validity of communication dated 5/12/2022 (Annex.5), direction to grant exemption to the petitioner from payment of earnest money/Bid guarantee amount pursuant to the NIT (Annex.3) and grant exemption as per communication dated 8/3/2011 (Annex.7).

2. It is inter alia indicated in the petition that the petitioner is registered with National Small Industries Corporation Ltd. and has been issued Government Purchase Enlistment Certificate (Annex.1), wherein, the petitioner has been registered for transportation and Man Power Services. It is inter alia indicated that the respondent NLC India Limited issued NIT for 'Collection & Conveyance of Bed/Fly ash from 'O'm level of Boiler/ESP area of Unit I & II, collection and lowering of Ash from Extraction feeder floor and TRC RCC floors of boiler area and regular cleaning of chequered plate platform of Boiler elevators for the year 2023-24.' The document inter alia indicated that the exemption is not applicable for the tender (NSIC, MSME etc.).

3. The petitioner sent a communication to the respondent no.2 seeking exemption based on the fact that the petitioner is MSME. The communication was responded by Annex.5 inter alia indicating that the tender is to be treated as works contract for which exemptions are not available and that the applicability of the exemptions for Bid Security/EMD was upto 31/12/2021 and that as per the extant procedure no exemptions are available for Bid Security/EMD against these types of tenders.

4. The petitioner again made representation referring to the Circular dated 8/3/2011 (Annex.7) issued by the Ministry of MSME and order dated 23/3/2012. On the representation made by the petitioner, the National Small Industries Corporation Limited vide Annex.8 also required the respondent no. 2 to grant relaxation in EMD to the petitioner. However, when the same was not done, the present petition has been filed.

5. It is submitted by learned counsel for the petitioner that the action of the respondent in indicating that the exemption from EMD and Bid Security is not available is incorrect inasmuch as under the provisions of MEME Act and Circulars issued by the authorities, the petitioner is entitled for the same and the stipulation made in the NIT deserves to be set aside and petitioner be permitted to participate in the tender without deposit of EMD.

6. I have considered the submissions made by learned counsel for the petitioner and have perused the material available on record.

7. The claim made by the petitioner for exemption despite indication made in the NIT that same would not be available has been responded by the respondent no. 2 vide Annex.5 on 12/10/2022 as under:

"This tender is to be treated as works contract for which exemptions are not available.

Also note that the applicability of exemptions for Bid Security/EMD is up to 31-12-2021.

As per the extant procedures, no exemption is available for Bid Security/EMD against these type of tenders."

8. The plea raised is that the tender is to be treated as works contract for which exemptions are not available.

9. Nowhere in the petition any challenge to the said aspect as to whether the contract in question is works contract or not has been laid.

10. Further, even when the National Small Industries Corporation ltd. vide Annex.8 on 6/12/202 required the respondent to allow relaxation in EMD to the petitioner, it has also not dealt with the said aspect.

11. The law on the aspect pertaining to applicability of MSME Act and exemptions available to MSME came up for consideration before the Delhi High Court in Shree Gee Enterprises vs. Union of India : W.P.(C) 7201/2015 decided on 2/11/2015, wherein, the Division Bench inter alia came to the following conclusion:

"8. In order to resolve the controversy, reference may be had to the public procurement policy for Micro, Small and Medium Enterprises (MSME) order dated 23.12.2012. The relevant clauses of the same reads as under:-

Whereas, the Central Government Ministries, Departments and Public Sector Undertakings shall procure minimum of 20 per cent of their annual value of goods or services from Micro and Small Enterprises.

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And whereas, the Public Procurement Policy rests upon core principles of competitiveness, adhering to sound procurement practices and execution of order for supply of goods or services in accordance with a system which is fair, equitable, transparent, competitive and cost effective; and

And whereas, for facilitating promotion and development of micro and small enterprises, the Central Government or the State Government, as the case may be, 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.

Now, therefore, in exercise of the powers conferred in section 11 of the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, the Central Government, by order notifies the Public Procurement Policy (hereinafter referred to as the (Policy) in respect of procurement of goods and services, produced and provided by micro and small enterprises, by its Ministries, Departments and Public Sector Undertakings.

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3. Mandatory procurement from Micro and Small 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.

9. Reference may also be had to the office memorandum dated 20.02.2014 issued by the Director of the Office of the Development Commissioner, Ministry of MSME, Union of India, wherein frequently asked questions and their answers had been circulated to the various Ministries and in particular to question No. 18 and their answers thereto which reads as under:-

Ques.18. Whether this policy is applicable for works/trading activities also

Ans. Policy is meant for procurement of only goods produced and services rendered by MSEs.

10. A reading of the policy along with the frequently asked questions and the answers, referred to above, clearly shows that the policy is meant for giving preference in respect of procurement of goods produced and services rendered by Micro, Small and Medium Enterprises (MSME). It would not be applicable to a "works contract" simpliciter

11. Learned counsel appearing for the Respondent No. 1 representing the Ministry of Micro, Small and Medium Enterprises, admitted that the policy was not applicable to works contracts and would be applicable only for procurement of goods produced and services rendered by MSME(s). The learned counsel fairly conceded that the subject tender being for a simpliciter works contract was not covered under the Public Procurement Policy for MSEs Order, 2012.

12. Since the subject contract is a simpliciter works contract, it is not covered by the Public Procurement Policy for MSEs Order, 2012 and as such, the Respondent No. 2 could not have given preference to the Respondent No. 3 by applying the said policy. The petitioner being L-1 was thus entitled to the award of the tender.”

13. Again in M/s Rahul Singh vs. Union of India & Ors. : Writ C No. 2316/2016 decided on 25/1/2017 by Allahabad High Court, it was inter alia laid down by the Division Bench as under:

"A reconstruction of section 11 bears out that it empowers the Central Government to formulate preference policies in respect of (a) procurement of goods produced by MSE and (b) services provided by a MSE. The words "services provided" as used in the said provision must necessarily be read as disjunctive to the expression goods produced. It cannot possibly be disputed that a "works contract" forms a completely different and distinct genre than a contract for supply of goods or for that matter a contract for providing services. A works contract is essentially an indivisible contract which may involve not just the supply of goods but also the provision of labour and service. This particular specie of contract has rightly been understood by the Railways as to not fall within the ambit of the 2006 Act. In our considered opinion, the provisions of the 2006 Act and more particularly section 11 thereof, only contemplates and brings within its fold contracts for supply of goods and provision of service simpliciter. Answering a similar contention with respect to the provisions of the Finance Act, 1994 which used the word "service" alone, the Supreme Court in CCE & Customs v. Larsen & Toubro observed as under:-

"16. We find that the assessees are correct in their submission that a works contract is a separate species of contract distinct from contracts for services simpliciter recognised by the world of commerce and law as such, and has to be taxed separately as such. In Gannon Dunkerley [1959 SCR 379 [LQ/SC/1958/40] : AIR 1958 SC 560 [LQ/SC/1958/40] ], this Court recognised works contracts as a separate species of contract as follows: (SCR p. 427 : AIR p. 578, para 48)

"48. To avoid misconception, it must be stated that the above conclusion has reference to works contracts, which are entire and indivisible, as the contracts of the respondents have been held by the learned Judges of the court below to be. The several forms which such kinds of contracts can assume are set out in Hudson on Building Contracts, at p. 165. It is possible that the parties might enter into distinct and separate contracts, one for the transfer of materials for money consideration, and the other for payment of remuneration for services and for work done. In such a case, there are really two agreements, though there is a single instrument embodying them, and the power of the State to separate the agreement to sell, from the agreement to do work and render service and to impose a tax thereon cannot be questioned, and will stand untouched by the present judgment."

23. A close look at the Finance Act, 1994 would show that the five taxable services referred to in the charging Section 65(105) would refer only to service contracts simpliciter and not to composite works contracts. This is clear from the very language of Section 65(105) which defines "taxable service" as "any service provided". All the services referred to in the said sub-clauses are service contracts simpliciter without any other element in them, such as for example, a service contract which is a commissioning and installation, or erection, commissioning and installation contract. Further, under Section 67, as has been pointed out above, the value of a taxable service is the gross amount charged by the service provider for such service rendered by him. This would unmistakably show that what is referred to in the charging provision is the taxation of service contracts simpliciter and not composite works contracts, such as are contained on the facts of the present cases. It will also be noticed that no attempt to remove the nonservice elements from the composite works contracts has been made by any of the aforesaid sections by deducting from the gross value of the works contract the value of property in goods transferred in the execution of a works contract.

24. In fact, by way of contrast, Section 67 post amendment (by the Finance Act, 2006) for the first time prescribes, in cases like the present, where the provision of service is for a consideration which is not ascertainable, to be the amount as may be determined in the prescribed manner."

No provision of the 2006 Act Bids us to deconstruct a works contract into elements relating to supply of goods and provision of service. Neither section 11 nor the Public Procurement Policy, 2012 appears to envisage a composite and distinct category of contract such as a works contract actually is. The classification of the tender work under Tenders 45 and 48 were correctly classified by the respondents in terms of the operating manual to be a works contract. There was no challenge to this classification. Consequently we find no error in the decision of the respondents in holding the petitioner to be ineligible for the grant of exemptions and benefits under the Public Procurement Policy, 2012. Their decision to cancel the tender in the absence of deposit of tender cost and earnest money is upheld. Consequently the writ petitions fail and are accordingly dismissed."

14. As already observed hereinbefore, there is no challenge to the stand taken by the respondent no.2 that the tender in question was to be treated as works contract and once it is treated as works contract, as laid down in the two judgments, it is apparent that the provisions of MSME Act and the notifications issued thereunder would have no application.

15. In view of the above discussion, there is no substance in the writ petition and the same is, therefore, dismissed.