In a judgment that drew considerable attention inside the Srinagar courtroom today, the High Court of Jammu & Kashmir and Ladakh dismissed an appeal filed by several MSME manufacturers who had challenged three large-scale electrification tenders issued under the Revamped Distribution Sector Scheme (RDSS). The court, after a fairly long hearing where both sides argued with visible intensity, concluded that the disputed contracts were composite “Supply-Installation-Testing (SIT)” projects and therefore fell outside the protective umbrella of the MSMED Act, 2006.
Background
The case arose when Zain Electricals and other MSME units questioned e-tenders issued by the Power Development authorities for electrification works in Kupwara, Tulail, and Kanzalwan. These firms claimed that many items listed in the tenders were among the 358 goods reserved exclusively for MSMEs under the 2012 Public Procurement Policy.
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Their counsel argued that the Government was obligated to buy 25% of such items from MSMEs and that mixing reserved items inside turnkey works amounted to bypassing statutory protections. The firms said, almost pleadingly at one point, that they were being “shut out” by eligibility criteria requiring past experience and high turnover-conditions they could not meet.
But the Government countered that RDSS projects are executed strictly on a turnkey methodology and involve not just supplying materials but installing, testing, commissioning, and maintaining the system. “These are SIT contracts, not mere procurement,” the Government Advocate stressed repeatedly.
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Court’s Observations
Throughout the hearing, the Bench-comprising the Chief Justice and Justice Rajnesh Oswal-seemed unconvinced by the appellants’ attempt to split the projects into smaller procurement pieces.
Referring to the Supreme Court’s ruling in Kone Elevator, the Bench reminded that when a work requires multiple integrated components to be delivered as one functioning system, it becomes a composite contract, not a purchase order.
“The bench observed, ‘These contracts are inseparable-supply, installation, testing, and quality assurance are all part of one unified responsibility placed on a turnkey contractor.’”
The judges further held that the MSMED Act covers procurement of “goods and services,” but an SIT project goes beyond that-it is an execution contract, not mere buying.
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The court also noted a practical difficulty: quality assurance under RDSS must run through every stage of the turnkey contract. If courts were to break apart such contracts just to accommodate reserved MSME items, it would, in the judge’s words, “amount to interfering with policy execution,” something courts avoid unless clear arbitrariness is shown.
On the question of locus standi, the Bench disagreed with the writ court’s earlier finding that MSMEs lacked standing due to non-participation. Since they were ineligible anyway, the High Court said that issue “ought not to have been framed.”
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Decision
Ultimately, the Division Bench upheld the writ court’s dismissal, finding “no arbitrariness, mala fides, or breach of procurement norms.” The appeal was dismissed as meritless, with the court concluding that MSMED protections simply do not apply to the turnkey SIT contracts at the heart of RDSS projects.
And with that, the court closed the matter.
Case Title: Zain Electricals & Others v. Union Territory of Jammu & Kashmir & Others
Case No.: LPA No. 251/2025 (O&M)
Case Type: Letters Patent Appeal (against dismissal of writ petition challenging e-NITs)
Decision Date: 13 November 2025
