The Public Procurement Policy for Micro and Small Enterprises promises MSEs a real share of government purchase — but how far do its relaxations travel when the procurement concerns critical medical equipment? In Althion Tech Innovations Pvt. Ltd. v. Union of India, W.P.(C) 9110/2026, decided on 20 August 2026 (2026:DHC:6904-DB), a Division Bench of Justice V. Kameswar Rao and Justice Manmeet Pritam Singh Arora of the High Court of Delhi dismissed a micro enterprise's challenge to a tender floated by the Director General, Armed Forces Medical Services for reverse-osmosis water plants for hemodialysis facilities, which prescribed a minimum OEM turnover of ₹33 crores. The judgment maps the limits of MSE relaxations — and the sequence in which eligibility and preference operate.
The challenge
The Armed Forces Medical Services tendered for thirteen RO water plants for hemodialysis units — equipment where water purity is directly a matter of patient safety. The tender required the original equipment manufacturer to have a minimum turnover of ₹33 crores. The petitioner, a micro enterprise with a turnover of about ₹75 lakhs, argued the condition was self-contradictory and arbitrary: the same tender extended purchase preference to MSEs under the Public Procurement Policy for Micro and Small Enterprises Order, 2012, yet fixed an entry bar that no micro enterprise — statutorily capped at ₹10 crores turnover — could ever cross.
What the Division Bench held
The Bench dismissed the petition on three grounds. First, the policy framework itself contemplates exceptions: the Office Memorandum of 20 September 2016 permits procuring entities, for reasons recorded, to decline relaxation of prior-turnover and prior-experience criteria — and procurements bearing on public health and safety are the paradigm case. Dialysis-grade water plants sit squarely within that category, and sustained financial capability and after-sales support were legitimate concerns for capital medical equipment. Second, eligibility and preference operate sequentially: purchase preference is not applicable merely because the bidder is a micro enterprise; it assumes an otherwise eligible bid. Third, judicial review of tender terms remains restrained — the author of the tender is the best judge of its requirements, absent mala fides or perversity.
The Bench did not leave the anomaly unremarked. A tender that promises MSE preference while fixing an MSE-impossible threshold contains a real inconsistency, and the Court urged correction in future tenders. The observation matters: it acknowledges that preference clauses cannot be reduced to boilerplate, even where a particular procurement lawfully declines relaxation.
The framework at a glance
| Instrument | What it provides |
|---|---|
| MSMED Act, 2006 & classification norms | Defines micro, small and medium enterprises by investment and turnover; micro enterprises capped at ₹10 crore turnover. |
| Public Procurement Policy for MSEs Order, 2012 | 25% annual procurement target from MSEs for central ministries, departments and PSUs; price-matching purchase preference for eligible MSEs. |
| OM dated 20.09.2016 | Relaxation of prior turnover and experience for MSEs — but procuring entities may decline relaxation, for recorded reasons, where quality or public health and safety so require. |
| Judicial review standard | Tender terms interfered with only for arbitrariness, mala fides or perversity — not because a different criterion was possible. |
Practical significance
For MSEs bidding on government tenders, the decision clarifies where the leverage lies. The relaxation regime is the rule, and its denial is the exception requiring justification — so in procurements without a genuine health or safety character, an MSE confronted with an exclusionary turnover or experience bar has a substantial ground of challenge, mounted promptly at the tender stage. For procuring authorities, the judgment is equally a compliance note: record the justification for declining relaxation, and align preference clauses with eligibility thresholds so tenders do not promise with one clause what they withdraw with another.
The chamber of Advocate Manish Jha advises MSMEs and corporates on procurement, commercial disputes and writ remedies before the High Court of Delhi and the Supreme Court of India. This article is for general information; it is not legal advice and does not create an advocate-client relationship.
Frequently Asked Questions
Can a tender demand a turnover no MSE can have?
The statutory ceiling for a micro enterprise's turnover is ₹10 crores under the current classification, so a ₹33 crore OEM turnover floor excludes micro enterprises by definition. The Court nonetheless upheld the criterion here because the Government's 2016 Office Memorandum permits procuring entities to decline turnover and experience relaxations for procurements relating to public health and safety, with recorded justification.
What was the internal anomaly the Court flagged?
The tender simultaneously offered purchase preference to MSEs while fixing an eligibility threshold no micro enterprise could meet — making the preference clause meaningless in practice. The Bench noted the inconsistency and urged that future tenders be corrected, but held it did not invalidate the eligibility criterion for this health-critical procurement.
How do eligibility and purchase preference interact?
Sequentially, the Court held. A bidder must first satisfy the tender's eligibility criteria; only then do MSE preference provisions — such as price matching within the prescribed band — come into play. Purchase preference is not applicable merely because the bidder is a micro enterprise; it presupposes an otherwise eligible bid.
What should MSEs take from this decision?
Challenge tender conditions early and on the correct ground. Where the item procured is not health or safety critical, an unrelaxed turnover or experience bar may be vulnerable as contrary to the procurement policy; where it is, the authority's recorded justification becomes the battleground. Waiting until disqualification weakens both timing and equity.